Exchange fraud is a standard situation that you won’t be surprised by an experienced trader. It happens that the exchanges themselves take part in it, and it happens that only traders. And if fraud of several thousand dollars is a small thing in life, then some cases are stunning with their scale. Agree, when one trader manages to earn millions of dollars dishonestly. USA is impressive. We will discuss such cases further.
Fraud on a Large-Scale Exchange
- Bernard Madoff. This name is known to anyone who is at least a little familiar with finance and trading. The company of the former chairman of the board of directors of NASDAQ for 30 years brought investors 10-12% per annum. Positioning itself as an investment fund, the company was essentially a pyramid. Losses amounted to 50-65 billion dollars. USA, one of the French investors who invested 1.5 billion dollars. USA, committed suicide. The scam was revealed at the height of the 2008 crisis, when the influx of new customers dried up. And the main question is where the regulators looked. The sentence of Madoff – 150 years in prison.
- Enron. It may not be a fraud on the stock exchange, but it was precisely frauds with securities and financial statements that led to the bankruptcy of the largest US energy company in 2001, which dragged Arthur Andersen to the bottom of the Big Five auditor. Losses – about 40 billion dollars. United States.
- Jerome Chervil. An employee of Societe Generale caused damage to the bank in the amount of about $ 7 billion. USA. According to the official version, he opened positions in futures on bank and client money, exceeding the norms of risk management. Although Chervil himself argued that he did it on the orders of the leadership. His operations were noticed when the loss in 3 days was equal to about 2 billion dollars. United States.
- Kvek Adoboli. A trader of the Swiss bank UBS forged documents and played his own game with stocks and funds on stock exchanges. Loss – 2.3 billion dollars. United States.
- Spoofing. Two more traders distinguished themselves in a non-standard way of earnings in 2010 and in 2012. The non-standard lay in the fact that it took several years to prove the implicit guilt of traders, although what they did could not be called fair trading. Their strategy is called spoofing – instant order placement and withdrawal of orders, which thereby swing the price. CFTC in the United States considers the spoofing artificial manipulation of quotations and in accordance with the Dodd-Frank law severely punishes traders:
- In 2015, Michael Caucia was charged with high-frequency trading, which became the first in the history after the ban on spoofing since 2010. According to the CFTC, the trader purposefully tried to influence the price of futures by opening and closing orders within milliseconds. With this he was able to earn in 2.5 months more than 1 million dollars. USA. The sentence – 3 years of imprisonment and a fine of 2.8 million dollars. United States;
- Igor Oystacher manipulated the market from 2011 to 2014 for at least 51 days, but he was more fortunate – he got off with just a fine. Only from proven facts it is known that in 2012 a trader for 1 day spent about 80,000 operations with E-Mini futures in the amount of $ 6 billion. USA. The sentence – a fine of 2.5 million dollars. United States.
Proving fraud on the exchange in the form of spoofing is difficult, because you need to find in the actions of the trader purposeful intent. Because of the charges in high-frequency trading for a while.
In all cases of fraud on the stock exchange, one question arises: how was it possible to conduct operations for such amounts of money without any control. Alas, it turns out that this is possible.