VelocityShares 3x Inverse Crude Oil ETN (DWT)

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Franko placed the Spoof Orders and Genuine Orders in the same market (crude oil futures) and on the same exchange (either the Commodity Exchange, Inc. (COMEX) or the New York Mercantile Exchange). For example, Franko placed one or more Spoof Orders in crude oil futures on COMEX to benefit a Genuine Order in crude oil futures that he also placed on COMEX.

CFTC Orders Futures Trader and Trading Firm to Pay $2.3 Million in Penalties for Cross-Market and Single-Market Spoofing and Manipulative Scheme

Washington, DC—The Commodity Futures Trading Commission (CFTC) issued two orders today filing and settling charges against Victory Asset, Inc. (Victory) and Michael D. Franko for spoofing—bidding or offering with the intent to cancel the bid or offer before execution—and for the use of a manipulative scheme

Another aspect of Franko’s scheme involved cross-market spoofing, in which Franko placed his Spoof Orders and Genuine Orders in different, but correlated, markets (i.e., copper futures on COMEX and LME). For example, Franko placed one or more Spoof Orders in copper futures on COMEX to benefit a Genuine Order that he placed in copper futures on LME, taking advantage of the correlation in price between these markets. Franko also placed one or more Spoof Orders in copper futures on LME as part of a scheme to benefit a Genuine Order he placed in copper futures on COMEX.

This case is brought in connection with the CFTC Division of Enforcement’s Spoofing Task Force, and the staff members responsible are Margaret Aisenbrey, Alison Auxter, Jordon Grimm, Jo Mettenburg, Elsie Robinson, Christopher Reed, and Charles Marvine.