Court approves $15M settlement in spoofing case targeting Tower Research Capital
The Honorable John J. Tharp, Jr of the Illinois Northern District Court has granted a preliminary approval of a $15 million settlement in a spoofing case targeting proprietary trading firm Tower Research Capital. The approval was granted following a hearing held on March 4, 2021.
The plaintiffs in this case – Gregory Boutchard and Synova Asset Management, LLC have moved for the settlement with Tower. The settlement amount is separate from, and in addition to, the victims’ compensation available from Tower’s settlements with the U.S. Department of Justice (DOJ) and the U.S. Commodity Futures Trading Commission (CFTC).
The sum will completely resolve this action on terms that ensure all eligible Class Members can be compensated for damages caused by the defendants’ alleged spoofing of the market for E-Mini Index Futures and Options on E- Mini Index Futures. Class Plaintiffs and Tower reached this settlement following months of hard-fought, arm’s length negotiations supervised by a highly respected mediator, Jed D. Melnick, Esq., significant confirmatory discovery, and months of additional negotiations over the specific terms of the Settlement Agreement.
This case was brought against Tower, a proprietary trading firm, and a group of its former futures traders on behalf of a Class of all persons and entities that purchased or sold any E-Mini Index Futures or Options on E-Mini Index Futures on the Chicago Mercantile Exchange (CME) and/or the Chicago Board of Trade (CBOT) from at least March 1, 2012 through October 31, 2014.
The claims stem from October 2018 criminal charges against former Tower employees and co-Defendants Kamaldeep Gandhi, Yuchun Mao a/k/a Bruce Mao, and Krishna Mohan, members of the so-called “Relay Team,” for their roles in spoofing the E-Mini Index Futures market. Boutchard filed the initial complaint against the defendants on October 19, 2018 alleging that the defendants violated the Commodity Exchange Act, 7 U.S.C. §§ 1 et. seq. (CEA), and common law by intentionally manipulating the prices of E-Mini Index Futures and Options on E-Mini Index Futures through a technique called “spoofing.”
The individual defendants allegedly placed orders for E-Mini Index Futures and then canceled them prior to execution to send false supply and demand signals to the market. This false pricing information caused the prices of E-Mini Index Futures and Options on E-Mini Index Futures to move in a direction that was favorable to Defendants’ trading positions but harmful to other investors, like Class Plaintiffs and the Class.
Tower has agreed to pay $15 million to Class Plaintiffs and the Settlement Class. The Settlement Class is defined as:
All persons and entities that purchased or sold any E-Mini Index Futures or Options on E-Mini Index Futures on the Chicago Mercantile Exchange (“CME”) and/or the Chicago Board of Trade (“CBOT”) from at least March 1, 2012 through October 31, 2014 (the “Class Period”). Excluded from the Settlement Class are the Defendants and any parent, subsidiary, affiliate or agent of any Defendant or any co-conspirator whether or not named as a Defendant, and the United States Government.
Class Members who do not request exclusion from the Settlement Class and submit a claim will receive a pro rata share of the $15 million after any authorized fees, costs and expenses are deducted, based on a calculation of the volume of their transactions adjusted by certain multipliers as described in the accompanying Distribution Plan.
In exchange, the Settlement provides that the releasing parties will “release and forever discharge and shall be enjoined from prosecuting the released claims against the Released Parties” including all the defendants in this action.