conventiontfs桌面

UNITEDSTATESDISTRICTCOURTSOUTHERNDISTRICTOFNEWYORKCOMMODITYFUTURESTRADINGCOMMISSION,Plaintiff,v.
TFS-ICAP,LLC,TFS-ICAPLTD.
,IANDIBB,andJEREMYWOOLFENDEN,Defendants,CivilActionNo.
18-cv-8914ECFCaseJURYTRIALDEMANDEDCOMPLAINTFORINJUNCTIVERELIEF,CIVILMONETARYPENALTIES,ANDOTHEREQUITABLERELIEFPlaintiffCommodityFuturesTradingCommission(the"CFTC"or"Commission"),byandthroughitsundersignedattorneys,herebyallegesasfollows:I.
SUMMARY1.
Foroversevenyears,TFS-ICAP,LLCandTFS-ICAPLtd.
(together,"TFS-ICAP")brokersroutinelyattemptedtodeceive—anddiddeceive—theirclientsbycommunicatingtothemfakebidsandoffersandfaketradesintheforeignexchange("FX")optionsmarket.
TFS-ICAPbrokersdidthiswiththetacitapprovalofseniormanagersatTFS-ICAP,includingtheChiefExecutiveOfficer("CEO"),IanDibb.
2.
Thepracticeofcommunicatingfakebidsandoffers—bidsandoffersthatwerenotfromanytradinginstitution,butratherweremadeupbythebroker—isknownamongbrokersintheFXoptionsindustryas"flyingprices"or"flyingrates.
"Thepracticeofcommunicatingfaketrades—specifically,communicatingthatatradehadoccurredatacertaintimeandpricelevelwhenithadnot—isknownas"printing"or"calling"trades.
ByflyingCase1:18-cv-08914Document1Filed09/28/18Page1of372pricesandprintingtrades,brokersatTFS-ICAPintendedtocreateanillusionofgreaterliquidityandtighterspreadsonTFS-ICAP'stradingplatformandinduceclientstotransactviaTFS-ICAP'splatformandbrokers.
3.
Fromatleast2008to2015(the"RelevantPeriod"),flyingandprintingwerecoreelementsofTFS-ICAP'sbrokingactivityintheUnitedStatesandtheUnitedKingdom.
ThroughouttheRelevantPeriod,TFS-ICAPbrokersflewpricesandprintedtradestoclientsoverthephoneline,instantmessage,andonVolbroker,TFS-ICAP'sproprietaryelectronictradingplatform.
ToflypricesandprinttradesonVolbroker,TFS-ICAPbrokersusedwhatwasknownasa"TFSalias.
"TheTFSaliasesallowedbrokerstopopulatetheVolbrokertradingscreenwithbidsandoffersthatwerenotrealbutappearedtoclientsastradableprices.
TheTFSaliasesalsoallowedbrokerstomatchthesefakebidsandofferswitheachother,causingtheVolbrokerscreentoflashandgiveclientsthefalseimpressionthatatradehadoccurred.
4.
CertainseniormanagersatTFS-ICAPkneworhadconstructiveknowledgethatbrokersatTFS-ICAPregularlyflewpricesandprintedtradesthroughouttheRelevantPeriodbutdidnothingtopreventordeterthesedeceptivepractices.
Suchseniormanagersincluded(1)JeremyWoolfenden,whoatallrelevanttimeswastheGlobalHeadofEmergingMarketsbrokingatTFS-ICAP;and(2)IanDibb,theCEOofTFS-ICAPfromapproximately2011to2017.
5.
Inaddition,inoraboutearly2015,TFS-ICAPbrokersinNewYorkbeganflyingpricesandprintingtradesinthenameofaCFTC-registeredswapdealer("BankA"),withoutBankA'sknowledgeorconsent.
ByMarchof2015,Woolfendenwasawareofthisconductanddidnotdoanythingtopreventitorholdthoseengagingintheconductaccountable.
Case1:18-cv-08914Document1Filed09/28/18Page2of3736.
WhenitcametotheattentionofDibbthatNewYorkbrokerswereusingBankA'snametoflypricesandprinttrades,Dibbwasfarmoreconcernedwiththepossibilitythatthisconduct—andthebroaderpracticesofflyingandprinting—wouldbecomepublicknowledgethanhewaswithholdingindividualsaccountableorinvestigatingthescopeofwrongdoing.
Tothatend,DibbandothersundertookeffortstopassoffthefaketradesinBankA'snameaslegitimate.
Moreover,asdescribedbelow,DibbandothersassociatedwithTFS-ICAPtookaffirmativestepstopreventgovernmentauthorities,includingtheCFTC,fromdiscoveringthefullextentofflyingandprintingatTFS-ICAP.
7.
Fromatleast2012throughAugust2015(the"ChargingPeriod"),followingtheeffectivedateoftheDodd-FrankWallStreetReformandConsumerProtectionActof2010,Pub.
L.
111-203,H.
R.
4173(the"Dodd-FrankAct"),anditsrelatedregulations,TFS-ICAPbrokers'conductdescribedhereinviolatedSections4b(a)(2),6(c)(1),and4c(a)(1)-(2)oftheCommodityExchangeAct(the"Act"),7U.
S.
C.
§§6b(a)(2),9(1),6c(a)(1)-(2)(2012),andCommissionRegulation("Regulation")180.
1,17C.
F.
R.
§180.
1(2018),totheextentsuchconductwasdirectedinpartatorrelatedtothesolicitationoforformationofFXOptionscontractswithU.
S.
persons.
8.
ThebrokersengagedintheconductdescribedhereinwithinthescopeoftheiremploymentwithTFS-ICAP.
Accordingly,TFS-ICAPisliablefortheseviolationspursuanttoSection2(a)(1)(B)oftheAct,7U.
S.
C.
§2(a)(1)(B)(2012).
TFS-ICAPisalsoliableunderRegulation166.
3,17C.
F.
R.
§166.
3(2018),foritsfailuretosupervisebrokerconduct.
9.
Fromatleast2012throughAugustof2015,DibbandWoolfendeneachcontrolledbrokeractivityatTFS-ICAPinbothLondonandtheUnitedStates.
Thiscontrol,combinedwith(a)theirknowledgeorconstructiveknowledgeofconductdescribedhereinandCase1:18-cv-08914Document1Filed09/28/18Page3of374(b)theirfailuretomaintainareasonablyadequatesystemofsupervision,givesrisetotheirliabilityforalltheunderlyingviolationspursuanttoSection13(b)oftheAct,7U.
S.
C.
§13c(b)(2012).
10.
TheirfailuretodevelopandimplementproceduresdesignedtodetectanddeterflyingandprintingalsogivesrisetoliabilityunderRegulation166.
3.
11.
ByencouragingU.
S.
andLondon-basedbrokerstoflypricesandprinttradesthroughouttheRelevantPeriod,Woolfendenaidedandabettedsuchactivity,givingrisetohisliabilityforalltheunderlyingviolationspursuanttoSection13(a)oftheAct,7U.
S.
C.
§13c(a)(2012).
12.
PlaintiffCFTCbringsthisactionpursuanttoSection6coftheAct,7U.
S.
C.
§13a-1(2012),toenjoinDefendants'violativeactsandpracticesandtocompelDefendants'compliancewiththeAct.
Inaddition,PlaintiffCFTCseekscivilmonetarypenaltiesandsuchotherequitablerelief,includingbutnotlimitedtodisgorgement,asthisCourtdeemsnecessaryandappropriate.
II.
JURISDICTIONANDVENUE13.
ThisCourthasjurisdictionoverthisactionunder28U.
S.
C.
§1331(2012)(federalquestionjurisdiction)and28U.
S.
C.
§1345(2012),whichprovidesthatdistrictcourtshaveoriginaljurisdictionovercivilactionscommencedbytheUnitedStatesorbyanyagencyexpresslyauthorizedtosuebyActofCongress.
Section6c(a)oftheAct,7U.
S.
C.
§13a-1(a)(2012),authorizestheCommissiontoseekinjunctivereliefagainstanypersonwheneveritshallappeartotheCommissionthatsuchpersonhasengaged,isengaging,orisabouttoengageinanyactorpracticeconstitutingaviolationofanyprovisionoftheActoranyrule,regulationororderthereunder.
Case1:18-cv-08914Document1Filed09/28/18Page4of37514.
VenueproperlylieswiththisCourt,pursuanttoSection6c(e)oftheAct,7U.
S.
C.
§13a-1(e)(2012),becausetheDefendantstransactedbusinessinthisDistrictandactsandpracticesinviolationoftheActoccurredinthisDistrict.
Venueisalsoproperpursuantto28U.
S.
C.
§1391(c)(3)(2012).
III.
PARTIES15.
PlaintiffCommodityFuturesTradingCommissionisanindependentfederalregulatoryagencythatischargedbyCongresswiththeadministrationandenforcementoftheActandRegulationspromulgatedthereunder.
16.
DefendantsTFS-ICAP,LLCandTFS-ICAPLtd.
aretheU.
S.
andU.
K.
entities,respectfully,constitutingajointventurebetweenTraditionFinancialServices,ICAPplc,andVolbroker.
com,Ltd.
TFS-ICAP,LLChasbeenregisteredwiththeCFTCasanIntroducingBrokersinceJanuary2013.
TFS-ICAPLtd.
hasbeenregisteredwiththeCFTCasanIntroducingBrokersinceNovember2015.
17.
DefendantJeremyWoolfendenhas,sinceatleast2007,beentheGlobalHeadofEmergingMarketsFXOptionsatTFS-ICAP.
Sinceatleast2007,hehasalsobeenanactivebrokerofcertainemergingmarketFXoptions.
WoolfendenhasbeenregisteredwiththeCFTCasanAssociatedPersonofTFS-ICAPLtd.
sinceNovember2015.
FromDecember2014toOctober2016,WoolfendenwasregisteredwiththeCFTCasanAssociatedPersonofTFSDerivativesLtd.
18.
DefendantIanDibbhasbeentheCEOofTFS-ICAPsince2011.
PriortobecomingCEO,hebrokeredforeignexchangeoptionsinG10currencypairsonTFS-ICAP'sLondondesk.
DibbwasregisteredwiththeCFTCasanAssociatedPersonandlistedasaPrincipalofTFS-DerivativesLtd.
fromapproximatelyDecember2014toOctober2016andMay2014toOctober2016,respectively.
DibbhasbeenregisteredwiththeCFTCasanAssociatedCase1:18-cv-08914Document1Filed09/28/18Page5of376PersonofTFS-ICAPLtd.
sinceNovember2015andlistedasaPrincipalsinceJuly2015.
HehasbeenlistedasaPrincipalofTFS-ICAP,LLCsinceMay2014.
Fromatleast2013to2016,DibbwasoneofthreeTraditionFinancialServices-affiliateddirectorsofTFS-ICAP,LLC.
IV.
FACTSOrganizationalBackgroundFormationofTFS-ICAP19.
TFS-ICAP,LLCwasformedin2000bythemergeroftheFXoptionsdivisionsofTraditionFinancialServices,Inc.
("Tradition")andICAPplc("ICAP").
20.
In2001,Volbroker.
comLtd.
becametheownerofa49%stakeinTFS-ICAP,LLC.
Theremaining51%wasownedbyTFS-ICAPHoldingsLLC("Holdings").
Traditionowned55%ofHoldings,andthereforea28%shareofTFS-ICAP,LLC.
ICAPowned45%ofHoldings,andthereforea23%shareofTFS-ICAP,LLC.
21.
Accordingtothe2001agreementbetweenHoldingsandVolbrokerGroup,theBoardofTFS-ICAP,LLCwastobemadeupoftenindividuals—sixfromHoldingsandfourfromVolbroker.
22.
Moreover,accordingtoa2001agreementbetweenTraditionandICAP,theBoardofHoldingswastoconsistofsixindividuals—uptothreeappointedbyTraditionanduptothreeappointedbyICAP.
Furthermore,theseindividualswouldalsoserveasHoldings'representativesontheTFS-ICAP,LLCBoard.
23.
The2001agreementbetweenHoldingsandtheVolbrokerGroupstatedthatthe"daytodayrunningoftheCompanyshallbedelegatedtoandshallbetheresponsibilityofthe[Holdingsboardmembers].
"24.
The2001agreementbetweenTraditionandICAPstatedthattheHoldingsboard"shallhaveresponsibilityforthesupervisionandmanagementoftheCompanyanditsbusinessCase1:18-cv-08914Document1Filed09/28/18Page6of377including,withoutlimitation,decisionsmadebytheCompanyinitscapacityasamemberinTFS-ICAPLLC.
"25.
TFS-ICAPLtd.
'sownershipandboardstructureisanalogoustothatofTFS-ICAP,LLC.
26.
U.
S.
-basedbrokerswereemployedbyTFS-ICAP,LLC.
27.
U.
K.
-basedbrokerswereemployedbyTFS-ICAPLtd.
28.
WhileTFS-ICAP,LLCandTFS-ICAPLtd.
areseparatelegalentities,atalltimesduringtheRelevantPeriod,theyweretreatedasonecompany.
TherewasonlyoneCEO,towhombothLondon-andU.
S.
-basedbrokersreported.
TFS-ICAP'sGlobalHeadofEmergingMarketsalsooversawtheemergingmarketsbrokersinLondonandtheUnitedStates,andreportedtotheCEO.
TFS-ICAPOffices29.
ThroughouttheRelevantPeriod,TFS-ICAP'sLondonbusinesswashousedinTradition'sLondonoffices.
TheLondonbusinessconsistedofaG10desk,anexoticsdesk,andanEmergingMarketsdeskthatbrokeredCentralandEasternEuropean,MiddleEast,andAfrican("CEEMEA")currencypairs.
TheEmergingMarketsdeskalsobrokeredChinesecurrencypairsduringLondontradinghours.
FromJanuarytoJune2014,U.
S.
clientsofTFS-ICAP'sEmergingMarketsFXoptionsbusinesswereservicedbybrokersinTFS-ICAP'sLondonoffices.
30.
Until2013,TFS-ICAP'sU.
S.
operationsweredividedbetweenICAP'sofficesinNewJerseyandTradition'sofficesinNewYork.
Specifically,theG10andexoticFXoptionsbusinesswashousedinTradition'sofficesinNewYorkandtheEmergingMarketsFXoptionsbusinesswashousedinICAP'sofficesinNewJersey.
ThisEmergingMarketsdeskinNewCase1:18-cv-08914Document1Filed09/28/18Page7of378JerseymainlybrokeredLatinAmericanFXoptions("LATAM").
1InJanuary2013,theEmergingMarketsdeskmovedfromICAP'sofficesinNewJerseytoTraditionofficesinNewYork,placingallofTFS-ICAP'sU.
S.
operationsinsideTradition'sofficeinNewYork.
Since2013,inadditiontobrokingLATAMFXoptions,theEmergingMarketsdeskinNewYorkhasalsobrokeredChinesecurrencypairsduringpartoftheNewYorktradingday.
FXOptionContractsandTFS-ICAP'sTradingSystemForeignExchangeOptionContracts31.
Aforeignexchangeoption("FXoption")is,initsmostbasicform,arighttoexchangeonecurrencyforanotheratapre-agreedconversionrate,onasetdateinthefutureoroverasetperiodoftime.
Theprice,orcost,oftheoptioniscalledthepremium.
However,unlikestockoptions,forexample,whicharequotedintermsofthepremium,marketconventiondictatesthatFXoptionsarequotedintermsofimpliedvolatility,whichisexpressedasapercentage.
WhentradersplacebidsandoffersforFXoptions,thesebidsandoffersareexpressedintermsofimpliedvolatility.
32.
Accordingly,toenterintoanFXoptionstransaction,tradersagreeonanimpliedvolatilitylevel,notadollaramount.
Aftertheyagreeonanimpliedvolatilitylevelatwhichtotransact,thatvolatilitylevel—alongwithotherinputssuchasthespotandforwardrate2—isputintoanoptionspricingtoolwhichcomputestheactualpremiumpaidfromthebuyeroftheoptiontotheseller.
33.
Therighttobuyacurrencyatasetrateonsomefuturedateisreferredtoasa"call"option.
Therighttosellacurrencyatasetrateonsomefuturedateisreferredtoasa1ThevastmajorityofLATAMcurrencyoptiontradingconsistedofUSD/MXN(Dollar/MexicanPeso)andUSD/BRL(Dollar/BrazilianReal)currencypairs.
2Therearewidelypublishedmarketratesforthespotandforwardrates,soitisextremelyrarethattraderswouldnegotiateoverthem.
Case1:18-cv-08914Document1Filed09/28/18Page8of379"put"option.
Multiplecallandputoptionscanbe—andoftenare—combinedandtradedtogether.
Examplesofsuchcombinationsinclude"straddles,""butterflies,"and"riskreversals.
"Volbroker34.
AtalltimesduringtheRelevantPeriod,VolbrokerwastheproprietaryelectronictradingplatformforFXoptionsusedbybrokersatTFS-ICAPandmadeavailabletoTFS-ICAPclients(traders).
TheplatformallowedclientstopostlivebidsandoffersforFXoptionsinavarietyofcurrencypairs,optionsstrategies,andtenors.
(The"tenor"ofanoptionreferstothelengthoftimebeforeitexpires(e.
g.
,1week,1month,3months,6months,1year,etc.
).
)Theplatformalsoallowedbrokerstopostsuchbidsandoffersonatrader'sbehalf.
Eachbestbidandofferforeachparticularoptionappearedinitsowntile(box)inabid-offergridontheusers'screens.
Thebidsandofferswereanonymous,excepttothebrokers,whowereabletoseewhichinstitutionwasbehindeachone.
Moreover,eachtraderwasabletoidentifywhichbidsandoffers,ifany,hadbeenpostedbyabrokeronhisorherbehalf.
35.
Ifatrader—orabrokeronatrader'sbehalf—wantedtotradeonaparticularbidorofferpostedontheVolbrokerscreen,hecouldsimplyclickonitandenterthevolumehewantedtotradeatthatlevel.
3ThiswouldresultinaflashontheVolbrokerscreen,notifyingusersthattheoptionhadtradedatthatparticularvolatilitylevel.
Italsoresultedinthebasictradedetailsappearingina"tradeticker,"whichwasalsovisibletousers.
36.
Onlyafterthetradeflashoccurred,andthetradeappearedintheticker,didthepartiestothetradelearneachother'sidentityandagreeonfurtherdetailssuchasthespotandforwardrate.
Asmentionedabove,these"details"wereveryrarelydisputedornegotiated.
Itwasevenrarerstillforatradetofallapartbecauseofadisagreementoverthedetails.
3"Level"referstovolatilitylevel.
Asexplainedabove,bidsandoffersareexpressedintermsofvolatility.
Case1:18-cv-08914Document1Filed09/28/18Page9of371037.
TFS-ICAPbrokershadalistofbanknamesonthesideoftheirVolbrokerscreens.
Thesewerecalledbank"aliases.
"Topostabidorofferonbehalfofatraderataparticularbank,thebrokerclickedonthealiasofthatbankandthenpostedtheprice(i.
e.
,volatilitylevel)inthetilecorrespondingtothecurrencypairandtenorthetraderdesiredtobidoroffer.
Similarly,tohitorliftanexistingpriceonbehalfofatraderatabank,thebrokerwouldclickonthatbank'saliasandthenclickonthetileoftheoptionthattraderwantedtotransactupon.
38.
Startinginoraround2005,certain"TFS"aliaseswereaddedtothealiaslist.
Ratherthanbeinglimitedtopostingpricesunderthealiasofatradinginstitution,brokerswerethenabletopostpricesunderaliasessuchas"TFS-NY"(TFS-NewYork),"TFS-LDN"(TFS-London),and"TFS-FFT"(TFSFrankfurt).
39.
Asabroker,however,TFS-ICAPwassimplyanintermediarybetweentwotradingparties;itcouldnotbeacounterpartytoanFXoptionstransaction.
Accordingly,ifatraderacteduponaTFS-alias'sbidorofferitwouldnotconstituteagenuinetransaction.
40.
BythetermsoftheVolbrokerUserAgreementandVolbrokerUserGuide,traderswereledtobelievethatallbidsandoffersontheVolbrokerscreenwerebonafideandbindingbidsandofferspostedbyothertradinginstitutions.
BrokerMisconductFlying41.
Fromatleast2008andcontinuingthroughatleast2015,itwascommonpracticeforTFS-ICAPbrokersinbothLondonandNewYorktocommunicatenon-bonafidebidsandofferstotheirclients.
Specifically,brokerswouldrepresenttoclientsthattherewerebidsorCase1:18-cv-08914Document1Filed09/28/18Page10of3711offersforanoptionataparticularlevelwhen,infact,notradinginstitutionhadbidorofferedtheoptionatthatlevel.
42.
ThispracticewasreferredtointheFXoptionsbrokerageindustryas"flying"prices.
43.
Fromatleast2008andcontinuingthroughatleast2015,TFS-ICAPbrokersflewbidsandofferstoclientsovervoice(phone),instantmessage("IM"),andVolbrokeronadailybasis.
44.
ThesebrokerswouldflybidsandoffersonVolbrokerbypostingthemunderoneofthevarious"TFS"aliases(usually,TFSNYorTFSLDN).
Becausetheplatformwasanonymous,traderscouldnottellthedifferencebetweenbidsandoffersthatwereflownbythebrokersandbidsandoffersthatweremadebyanactualtradinginstitution.
Printing45.
Fromatleast2008andcontinuingthroughatleast2015,itwasalsocommonpracticeforTFS-ICAPbrokersinbothLondonandNewYorktocommunicatefaketradestoclients—i.
e.
,communicatethatatradehadoccurredwhenatradehadnot,infact,occurred.
46.
Thispracticewasknownintheindustryas"printing,""spoofing,"or"calling"atrade.
47.
Fromatleast2008andcontinuingthroughatleast2015,TFS-ICAPbrokersroutinelyprintedtradesovervoice,IM,andVolbroker,sometimesmultipletimesperday.
48.
Byprintingafaketrade,theTFS-ICAPbrokersoftensuccessfullyinducedtraderstoenterintoreal"follow-on"trades.
Case1:18-cv-08914Document1Filed09/28/18Page11of371249.
TFS-ICAPbrokersprintedtradesonVolbrokerbyusingoneTFSaliastoaggressonapricepostedunderanotherTFSalias,causingaflashonthetraders'Volbrokerscreensandsignalingtothemthatatradehadoccurredwhenonehadnotactuallyoccurred.
50.
CausingtwoTFSaliasestotransactagainsteachother,however,wasnottheonlywayfalsetradesweresignaledonVolbroker.
Non-existenttradesalsoflashedonclients'VolbrokerscreenswhenatraderaggresseduponaflownTFSprice,behindwhichtherewasnoactualcounterparty.
Whilethebrokermayhavelaterbeenabletofindanactualcounterparty,theVolbrokersystemsignaledatradebeforeonehadactuallybeenagreedupon.
IntentandMaterialityofFlyingandPrinting51.
AccordingtoTFS-ICAPbrokerswhohavecooperatedwiththeCFTCDivisionofEnforcement(the"Division"),TFS-ICAPbrokers'intentwhenflyingpricesandprintingtradeswastogiveclientstheimpressionthattherewasmoreliquidityonTFS-ICAP'splatformthanthereactuallywasandtoinducetraderstotransactattimesandpricesthattheywouldnototherwisehavetransacted.
52.
Forexample,TFS-ICAPbrokershopedthatwhenthey"printed"atrade,marketparticipantswouldrespondwithrequeststo"followon"—i.
e.
,tradeatthelevelthebrokerhadfalselyrepresentedwastrading.
53.
TFS-ICAPearnedcommissionsoffoftradesexecutedonVolbrokerorotherwisefacilitatedbyTFS-ICAPbrokers.
EachTFS-ICAPbroker'scompensationwasdirectlytiedtotheamountofcommissionsattributabletohisbrokingactivity.
54.
BecauseitwastheTFS-ICAPbrokers'practicenottoadmitwhentheyhadflownrates,traderswerenotawarethatmanyofthebidsandofferstheysawonVolbroker—orotherwisereceived—didnotrepresentactualbidsandoffersfromothertraders.
Indeed,Case1:18-cv-08914Document1Filed09/28/18Page12of3713VolbrokerusersweretoldbyTFS-ICAPthatthepricestheysawonthescreenweretradable.
Whenaflownpricewashitorlifted,brokersliedtomaintainthisillusion.
55.
IfaTFS-ICAPbrokergot"paid"or"given"onaflownprice,theTFS-ICAPbrokerswouldscrambletofindanactualcounterpartytostepintothetrade.
Ifthebrokerwasunabletofindacounterpartyhewouldlie—specifically,makeupanexcuse—tothetradertocoverupthefactthattheoriginalbidorofferwasnotreal.
56.
Insuchscenarios,brokerswouldtelltraders,forexample,thattheygot"doublehit,"thatthespotratehadmoved(ifithad),orthattheothertraderhadsteppedoffthedesk.
Brokersdidnotadmittotradersthatthebidorofferwasneveractuallythereinthefirstplace.
57.
TraderswerealsonotawarethatmanyofthetradesannouncedovervoiceandIM,aswellasmanyofthetradesflashingontheVolbrokerscreen,didnotsignifyactualtrades.
WhentheysawtheVolbrokerscreenflashorreadinachatthatatradehadoccurred,tradersbelievedthatanactualtradehadoccurredatthetimeandlevelindicated.
58.
Believingthatthepricingandtradeinformationcommunicatedtothemwasanaccuraterepresentationofmarketinterestandactivity,atleastsometradersusedthebids,offers,andtradestheysawonVolbrokerintheirproprietarypricingmodels.
59.
Thetradabilityofbidsandoffersonthescreenwasimportanttotraders;atleastsomewouldgetupsetatbrokersifapricetheyaggressedonturnedoutnottobeavailable.
60.
ThetradescommunicatedbyTFS-ICAPbrokerswereparticularlyimportantpiecesofinformationtotraders.
Knowledge(actualorperceived)thattwopartieshadconsentedtotradeanoptionataparticularlevelcarriedsubstantialweightinatrader'sdeterminationofwhatthefairmarketvaluewasforthatoptionandotherrelatedoptions.
61.
Generally,thefalseimpressionofliquiditycreatedbyTFS-ICAPbrokersCase1:18-cv-08914Document1Filed09/28/18Page13of3714succeededinattractingmoreclienteyestotheVolbrokerscreenandcausedtraderstotransactviaTFS-ICAPmorethantheywouldhaveifpriceswerenotflownoriftradeswerenotprinted.
HistoryandBreadthofMisconductTheOriginsofthePracticesofFlyingPricesandPrintingTradesonTFS-ICAP'sU.
S.
EmergingMarketsDesk62.
In2007,TFS-ICAP'sLATAMEmergingMarketsbrokingbusinesswashousedinICAP'sofficesinNewJersey.
Atthetime,ICAPprovidedadministrativeservicestotheLATAMdesk(e.
g.
,ITandhumanresources),andICAPexercisedadegreeofmanagerialcontroloverthedesk.
63.
InFebruaryof2007,Woolfenden,theGlobalHeadofTFS-ICAP'sEmergingMarketsbusiness,traveledtoICAP'sofficesinNewJersey.
ThepurposeofhistripwastoevaluateTFS-ICAP'sLATAMbusiness,whichhadbeenstruggling.
64.
Asaresultofthistrip,WoolfendenconcludedthatamainreasonfortheLATAMdesk'spoorperformancewasthatthebrokerswerenotfillingtheVolbrokerscreenwithbidsandoffers.
Specifically,theywerenotflyingenoughprices—oranyprices—ontheVolbrokerscreen.
Doingso,inhisview,wasnecessarytoattracttraders'attentiontothescreenandtherebyincreasebusiness.
65.
Indeed,flyingpricesandprintingtradeswere,atthistime,alreadycommonpracticesonotherdesksatTFS-ICAP,includingbutnotlimitedtoWoolfenden'sEmergingMarketsdeskinLondon.
66.
OnMarch12,2007,WoolfendencirculatedawrittenmemotoseniorTFS-ICAPofficialsrecommendingthatLATAMbrokersflyprices.
Indeed,thememosuggestedthatflyingpriceswasacriticalwaytowinmorebusiness.
Case1:18-cv-08914Document1Filed09/28/18Page14of371567.
Woolfenden'smemoexplicitlystatedthathewas"askingthe[co-manageroftheLATAMdesk]tostartflyingrates.
"468.
WoolfendennotonlyrecommendedthattheLATAMbrokersflyprices,butthattheyfly"tight"pricesthathadahigherchanceofgettinghitbythetraders.
Woolfendenacknowledgedthe"risk"involvedinsuchapractice—specifically,theriskthattheflownpriceswouldbehitandthebrokerswouldnotbeabletofindanactualcounterparty—andthereforesuggestedthatthebrokers"prepareexcuses"tobegiventothetradersthathittheflownprices.
69.
Moreover,thememostatedthatiftheLATAMdeskdidnotimplementhisrecommendedchangesandturnbusinessaround,"daytodayrunning"oftheLATAMbusinesswouldbeturnedovertoTradition-affiliatedTFS-ICAPmanagement.
70.
Thetwoco-managersoftheLATAMdeskatthetime—whowerelegacyICAPemployees—provedreluctanttoadoptWoolfenden'smoreaggressivebrokingpractices.
71.
Woolfendenimmediatelybegantounderminetheco-managersbyreachingouttojuniorbrokersontheLATAMdesktoteachthemhowtoflypricesandprinttrades.
72.
OnMarch14,2007,Woolfendenandathen-juniorTFS-ICAPbrokerontheLATAMdesk("NYBrokerA")exchangedinstantmessagesaboutflyingprices.
NYBrokerAstatedthatoneofthecurrentco-managers"doesntthinkitsworthit[sic].
.
.
flyingtoomanyprices.
.
.
worriedwewilllosecredibilityandmoney.
"Woolfendenrespondedthatflyingpriceswasanecessarypractice.
73.
Inlate2007andearly2008,Woolfendenfollowedthroughonhisthreat.
Hestrippedtheco-managersoftheLATAMdeskoftheirmanagerialresponsibilitiesandarrangedforaveteranLondonbrokerwithwhomhehadworkedcloselytotaketheirplace.
Woolfenden4Inbrokerlingo,"flyingrates"issynonymouswithflyingprices.
Case1:18-cv-08914Document1Filed09/28/18Page15of3716knewthattheveteranLondonbrokerwouldflypricesandprinttradesintheregularcourseofbusinessandencourageothersontheLATAMdesktodosoaswell.
74.
Indeed,WoolfendenhadencouragedtheveteranLondonbrokertoflypricesandprinttradeswhileworkinginLondon.
OnMarch1,2007,whentheveteranLondonbrokerbraggedaboutsuccessfullyprintingatrade,Woolfendenresponded,"nice.
"75.
OnApril24,2008,aspartofhiscontinuedefforttoteachtheLATAMbrokershowtoflyandprint,WoolfendenagainexchangedinstantmessageswithNYBrokerA.
WoolfendenexplainedtoNYBrokerAhowhe"wouldhavecalled"—i.
e.
,printed—aparticularoption"paid"eventhoughithadnotactuallytraded.
76.
OnoraroundMay2008,theveteranLondonbroker(hereinafter,"NYBrokerB"),whohadbeenpickedbyWoolfendentotakeoverasmanageroftheLATAMdesk,arrivedintheU.
S.
77.
NYBrokerBactedasdeskmanageroftheLATAMdeskfrom2008toearly2014.
Throughoutthisperiod,hereportedtoWoolfenden.
78.
From2008to2015,NYBrokerAandNYBrokerB,alongwithotherbrokersontheLATAMdesk,frequentlyflewpricesandprintedfaketradestoclientsastheyhadbeenencouragedtodobyWoolfenden.
TFS-ICAPEmergingMarketsBrokersintheUnitedStatesEmbraceFlyingandPrinting;ThePracticesContinueinNewYorkandLondon79.
Beginningin2008,asadirectresultofWoolfenden'sandTFS-ICAP'scontrolovertheLATAMdesk,brokersonthatdeskadoptedthepracticesofflyingpricesandprintingtrades.
80.
TheLATAMbrokersflewpricesandprintedtradesinthesamewaythatthebrokersinLondondid—inthewaytheywereexpectedtobyWoolfendenandTFS-ICAP.
Case1:18-cv-08914Document1Filed09/28/18Page16of371781.
FollowingtheeffectivedateoftheDodd-FrankActandrelevantregulations,nopolicieswerealteredtopreventLATAMbrokersfromflyingandprinting,andthepracticescontinued.
82.
FromJanuary2013throughDecember2014,TFS-ICAP'sLATAMbrokersinNewYork5postedover25,000LATAMFXoptionbidsandoffersusingaTFSalias.
Thevastmajority,ifnotall,ofthesepriceswereflown—theydidnotrepresentanactualbidorofferfromatradinginstitution.
83.
FromJanuary2013throughSeptember2015,TFS-ICAPbrokersinLondonalsopostedthousandsofpricespermonthonVolbrokerusingoneoftheTFSaliases.
Thevastmajority,ifnotall,ofthesepriceswereflown—theydidnotrepresentanactualbidorofferfromanytradinginstitution.
TradersfromU.
S.
-basedinstitutionscouldviewthesepricesontheirVolbrokerscreen.
84.
FromapproximatelyJanuary2014toJune2014,anumberofbrokersfromTFS-ICAP'sLondondeskassistedinbrokingLATAMFXoptionsforU.
S.
-basedclients.
85.
Duringthisperiodalone,TFS-ICAPbrokerspostedover6,900LATAMFXoptionpricesusingaTFSalias.
Thevastmajority,ifnotall,ofthesepriceswereflown—theydidnotrepresentanactualbidorofferfromatradinginstitution.
86.
From2008through2015,TFS-ICAP'sU.
S.
-basedbrokersalsoregularlyprintedtradesoverthephone,IM,andVolbroker.
ThesecommunicationsweredirectedatclientsbasedintheU.
S.
andabroad.
5ByJanuary2013,theLATAMdeskhadrelocatedtoTradition'sofficesinNewYork.
Case1:18-cv-08914Document1Filed09/28/18Page17of371887.
Forexample,onApril15,2015,NYBrokerBcommunicatedtoclientsoverIMthata2-weekUSD/BRLoptionhadtradedat17.
0.
Ithadnotactuallytradedatthatlevelatthattime.
88.
OnMay12,2015,NYBrokerAcommunicatedtoclientsoverIMthata1-monthUSD/MXNoptionhadtradedat11.
85.
Ithadnotactuallytradedatthatlevelatthattime.
89.
OnJuly20,2015,anotherNewYork-basedTFS-ICAPbroker("NYBrokerC")communicatedtoclientsoverIMthata1-monthUSD/MXNoptionhadtradedat9.
35.
Ithadnotactuallytradedatthatlevelatthattime.
90.
Inthefirsthalfof2014,TFS-ICAP'sLondon-basedbrokersalsoprintedtradesinLATAMcurrencypairswhilebrokingLATAMFXoptionsforNewYork-basedclients.
TheydidsooverIMandonVolbroker.
91.
Forexample,onApril24,2014,aTFS-ICAPLondonbrokerpostedanofferfora1-monthUSD/BRLoptionat11.
85undertheTFS-LDNalias.
NYBrokerBsubsequentlyhittheofferusingtheTFS-NYalias.
Thiscausedthe1-monthUSD/BRLtiletoflashonusers'screens,indicatingthatatradehadoccurredwhenithadnotactuallyoccurredatthattime.
Atapproximatelythesametime,multipleLondon-basedTFS-ICAPbrokerscommunicatedtoNewYork-basedclientsthatatradehadoccurredat11.
85.
92.
Anactualtradeoccurredatthatlevelapproximatelytwelveminuteslater,indicatingthatthecommunicationofthefalsetradeinducedtraderstoenterarealone.
93.
Inthefirsthalfof2014,TFS-ICAPbrokersprintedoverthirtytradesinLATAMcurrencypairsonVolbrokerbymatchingtwoTFSaliases.
94.
Non-existentLATAMFXoptiontradesalsoflashedonNewYork-basedclients'VolbrokerscreenswhenatraderaggresseduponaflownTFSprice,behindwhichtherewasnoCase1:18-cv-08914Document1Filed09/28/18Page18of3719actualcounterparty.
Whilethebrokermayhavelaterbeenabletofindanactualcounterparty,theVolbrokersystemsignaledatradebeforeonehadactuallybeenagreedupon.
95.
In2013and2014,thisoccurredover200timesinLATAMcurrencypairs.
96.
Forexample,onApril4,2014,aTFS-ICAPbrokerflewabidona1-monthUSD/MXNoptionusingtheTFS-LDNalias.
ThebidwassubsequentlyhitbyaNewYork-basedtrader,causingtheVolbrokertoshowatradebeforeonehadactuallyoccurred.
BecausetherewasnoactualbidbehindtheTFS-LDNprice,TFS-ICAPbrokersscrambledtofindanactualcounterparty.
Insolicitingothertraderstostepintothetrade,TFS-ICAPbrokersrepresentedthattheywereinajambecausetheyhadbeen"doublegiven"—i.
e.
,twotradershadhitthebidatthesametime.
Theyhadnot,infact,been"doublegiven.
"AtnotimedidtheTFS-ICAPbrokersadmittotradersthattheinitialbidwasflown.
97.
Approximatelytwentyminuteslater,thebrokersfoundanactualcounterpartytoexecutethetrade.
The2015NewYorkEmergingMarketConduct—UseofBankA'sName98.
FromatleastJanuary2015toAugust2015,brokersonTFS-ICAP'sNewYorkEmergingMarketsdesk,includingNYBrokerAandNYBrokerB,flewpricesandprintedtradesinthenameofBankA,aCFTC-registeredswapdealer,withoutBankA'sconsent.
Specifically,thesebrokersenteredbidsandoffersonVolbrokerusingBankA'saliasdespitethefactthatBankAhadnotactuallygiventhemanybidsandoffers.
99.
TheNewYorkEmergingMarketsbrokersknewthatBankAdidnottradeEmergingMarketsFXoptionsatthetimeand,therefore,thatBankA'straderswereunlikelytonoticethemisuseofBankA'saliasonthesystem,minimizingthelikelihoodofgettingcaught.
Case1:18-cv-08914Document1Filed09/28/18Page19of3720100.
TheNewYorkEmergingMarketsbrokersflewover3,000pricesinLATAMEmergingMarketscurrencypairsinBankA'snameonVolbroker.
101.
NYBrokerBflewhundredsofpricesinChinesecurrencypairsusingBankA'snameonVolbroker.
102.
Moreover,dozensoftradeswereprintedtothemarket(i.
e.
,flashedonVolbroker)asaresultofaBankApricebeinghitbytradersoraTFS-ICAPbroker.
SeniorManagerResponsibilityforMisconductSeniorManagersofTFS-ICAPWereAwareof,andCondoned,FlyingandPrintingDuringtheRelevantPeriod103.
ThroughouttheRelevantPeriod,seniormanagersatTFS-ICAP,includingDibbandWoolfenden,wereawareofandcondonedthepracticesofflyingandprintingandallowedthemtocontinue.
104.
ThroughouttheRelevantPeriod,WoolfendenflewpricesandprintedtradesinCEEMEAcurrencypairsandothers.
Forexample,onMarch4,2015,Woolfendenenteredabidfora1-monthUSD/TRY6optionat14.
5undertheTFS-LDNalias.
Shortlythereafter,heaggresseduponthatbidbyenteringanofferatthesamelevelundertheTFS-FFTalias.
Thiscausedthe1-monthUSD/TRYtileonusers'screenstoflash,indicatingthatatradehadoccurredat14.
5.
Atapproximatelythesametime,WoolfendenandotherbrokersontheLondonEmergingMarketsdeskcommunicatedtoclientsoverIMthatthe1-monthUSD/TRYoptionhadtraded.
Ithadnotactuallytradedatthatlevelonthatday.
105.
ThroughouttheRelevantPeriod,WoolfendenencouragedotherTFS-ICAPEmergingMarketsbrokerstoflyprices.
Onewayheencouragedbrokerstoflypriceswasby"namingandshaming"thebrokerswhohadputupthefewestpricesundertheTFSaliases.
6USD/TRYisshorthandfortheDollar/TurkishLiracurrencypair.
Case1:18-cv-08914Document1Filed09/28/18Page20of3721Underhisleadership,itbecameapracticeontheLondonEmergingMarketsdesktocirculateareportrankingbrokersbyhowmanypricestheyhadpostedunderaTFSalias—aproxyforwhohadflownthemost(andfewest)prices.
Onatleastoneoccasionin2015,theNewYorkbrokersweretoldtheirrespectiverankingsaswellinordertoincentivizethemtoflymoreprices.
106.
Onatleastoneoccasion,in2015,WoolfendenexplicitlydirectedaTFS-ICAPbrokerto"neveradmittoclientsthatwehaveeverflownrates.
"107.
ThroughouttheRelevantPeriod,WoolfendenalsoencouragedEmergingMarketsbrokerstoprinttrades.
OntheEmergingMarketsdeskinLondon,thedecisiontoprinttradeswasoftenmadeasagroup,includingWoolfenden.
108.
ThroughouttheRelevantPeriod,Woolfendenhadaccessto,andviewed,theLATAMcurrencytiles,wherehewouldhaveseenthepricesflownandtradesprintedbyNewYorkEmergingMarketsbrokersandLondonbrokerswhowerebrokingLATAMcurrencypairs.
109.
WoolfendenwasawareoftheNewYorkEmergingMarketsdesk'suseofBankA'snametoflypricesandprinttradesbyMarchof2015.
110.
Specifically,WoolfendenandotherLondonbrokerswerepresentinachatwhereNYBrokerBopenlydiscussedusingBankA'snametoflyaprice.
111.
Moreover,VolbrokertradedatashowsthatWoolfendenandatleasttwootherLondonbrokersviewedandcancelledBankAbidsandofferspostedbyNYBrokerA,sometimesreplacingthemwithotherflownpricesusingaTFSalias.
112.
PriortobecomingCEOofTFS-ICAPinoraround2011,IanDibbflewpricesandprintedtradesasaG10brokerinLondon.
113.
Priorto2011,whenDibbwasalsothemanageroftheG10deskinLondon,hetaughtthejuniorbrokershowtoflypricesandprinttrades.
Case1:18-cv-08914Document1Filed09/28/18Page21of3722114.
AsCEO,DibbcontinuedtobeawarethatTFS-ICAPbrokersinLondonflewpricesandprintedtradesbecausehefrequentlywalkedamongthebrokers,whospokeopenlyabout"puttingup"—i.
e.
,flying—theirownpricesandcommunicatingtoclientstradesthathadnotoccurred.
115.
Moreover,in2014and2015,DibbandWoolfendenbothkneworhadreasontoknowthatthesepracticescontinuedinNewYork.
116.
OnJuly15,2014,NYBrokerAtoldWoolfendenthathehad"seenalotofflownruns"andquestionedwhether"weshud[sic]beflyingthatmuchinaSEFmarket.
"117.
OnJuly16,2014,NYBrokerAemailedWoolfendenandDibbtoexpressconcernabouttheamountof"calling"—i.
e.
,printing—byTFS-ICAPbrokers.
Hestated,"Icompletelyunderstandthatsomepracticesarenecessarytoupholdtheperceptionofliquidityandourmarketshare,itjustneedstobedonemorecarefully.
"118.
WoolfendenrespondedthatNYBrokerAhadmadea"validpoint"andforwardedhisresponsetoDibb.
119.
NeitherWoolfendennorDibbtoldNYBrokerAoranyotherbrokerinNewYorktostopflyingorprinting.
120.
In2014and2015,WoolfendendirectlyparticipatedinthejointeffortamongtheNewYorkandLondondeskstobrokeChinesecurrencypairs.
TheseeffortsincludedregularlyflyingpricesandprintingtradestoclientsinLondonandNewYork.
Woolfendenwaspresentfor,andtookpartin,conversationsinwhichTFS-ICAPbrokersopenlydiscussedflyingpricesandprintingtradesinChinesecurrencypairs.
121.
OnJanuary29,2015,atatimewhentheLATAMbusinesswasstruggling,NYBrokerAmessagedWoolfenden,offeringto"startprintingandflyingmoreaggressively.
"Case1:18-cv-08914Document1Filed09/28/18Page22of3723122.
OnJune8,2015,NYBrokerAforwardedanemailtoDibbandWoolfendeninwhichhesuggestedthattheLATAMFXoptionsdeskinNewYorkhadbeenflyingprices.
123.
DespitetheirknowledgeorconstructiveknowledgethatNewYorkbrokersandothersatTFS-ICAPwereflyingpricesandprintingtrades,neitherDibbnorWoolfendentookanyaffirmativestepstopreventordiscouragethepractice.
124.
Rather,theNewYorkbrokersunderstoodthatsuchpracticeswereexpectedofthem.
DibbandWoolfendenLackedGoodFaith125.
WoolfendenandDibbexhibitedalackofgoodfaithinconnectionwiththeconductdescribedabove.
126.
Asdescribedabove,DibbandWoolfendenwereexplicitlynotifiedonmultipleoccasionsthroughJune2015thatTFS-ICAPbrokerswereflyingpricesandprintingtrades,yetdidnothingtocurtailthepractice.
127.
OnorpriortoAugust14,2015,DibbbecamespecificallyawareofthefactthatNewYorkbrokers,includingNYBrokerAandNYBrokerB,hadflownpricesandprintedtradesusingBankA'saliaswithoutitsknowledge.
128.
InAugustorSeptemberof2015,DibbandothersassociatedwithTFS-ICAPundertookeffortstopassofftheBankAtradesaslegitimate.
Specifically,theylookedforactualtradesthathadoccurredatthesamelevelonthesamedaysothat,ifeverquestionedaboutthetrades,theycouldsaythattheBankAtradesactuallyrepresentedrealtradesinthemarket.
129.
NYBrokerAandNYBrokerBwerenotimmediatelyterminatedforflyingpricesandprintingtradesusingBankA'salias.
130.
Instead,DibbsuspendedthemforsixtydaysonoraboutAugust20,2015.
Case1:18-cv-08914Document1Filed09/28/18Page23of3724131.
Thereafter,DibbdeliberatedforovertwomonthsaboutwhethertoterminatetheseNewYorkbrokersornot.
Dibbrepeatedlyexpressedhisconcernthat,ifterminatedfortheBankA-relatedconduct,NYBrokerAandNYBrokerBmightdiscloseothermisconduct,includingthesystemicuseofTFSaliasestoflypricesandprinttrades.
132.
OnAugust17,2015,Dibbstatedthatthe"problem"withfiringNYBrokerAandNYBrokerBisthat"wedon'twantdisgruntledemployees,wedon'twantwhistleblowers.
"Dibbstated,"IfIblowitopen,thecompany'sf[**]kedbecausethey'llinvestigateeverybodyandeveryscreenandeverythingwedo.
"133.
InaconversationwithDibbonoraboutSeptember30,2015,NYBrokerBthreatenedtoblowthewhistleon1,000tradesprintedviaIMoroverthephone.
Shortlythereafter,DibbconsideredofferingNYTraderBano-showjobinexchangeforstayingquiet.
134.
NeitherNYBrokerAnorNYBrokerBwasterminatedattheendoftheir60-daysuspension.
135.
OnoraboutNovember3,2015,NYBrokerAandNYBrokerBvoluntarilyresignedfromtheiremploymentatTFS-ICAP.
136.
DibbcausedTFS-ICAPcounseltoconveyfalseinformationtotheCFTCregardinghowtheBankAconductcametohisattention.
137.
Onatleastoneoccasion,DibbattemptedtoinfluencetestimonygivenbyaTFS-ICAPemployeetoDivisionstaff.
Insubstance,DibbtoldtheemployeetotellDivisionstaffthatflyingandprintingwerenotsystemicandthatitwas"ok"totellDivisionstaffthatyou"don'trecall.
"Case1:18-cv-08914Document1Filed09/28/18Page24of3725DibbandWoolfendenControlled,andWereResponsibleForSupervising,TFS-ICAPBrokerConduct138.
ThroughouttheRelevantPeriod,DibbandWoolfendencontrolled,andwereresponsibleforsupervising,TFS-ICAPbrokerconduct.
139.
WoolfendenwastheGlobalHeadofEmergingMarketsatTFS-ICAP—apositionthatatleastgavehimcontrolandsupervisoryresponsibilityoverallTFS-ICAPbrokersontheEmergingMarketsdesksinNewYorkandLondon,includingNYBrokerA,NYBrokerB,andNYBrokerC.
140.
HeexercisedthispowerwhenhewrestedcontroloftheLATAMdeskfromICAPin2007/2008andtaughtthebrokersonthatdeskhowtoflypricesandprinttrades.
141.
Hecontinuedtooverseeandcontroltheemergingmarketsbusinessthroughatleast2015.
142.
ThroughouttheRelevantPeriod,Woolfendencontrolledthebonuspoolandhadauthorityoverhiringdecisions.
ThemanageroftheNewYorkLATAMdeskreporteddirectlytohimandsenthimstatusreportsonthebusiness.
143.
DibbwastheCEOofTFS-ICAPfrom2011toatleast2017.
AstheCEO,hecontrolledallbrokersatTFS-ICAPandtheday-to-dayoperationsofthejointventure.
144.
Dibbwasresponsibleforimplementingcompanypoliciesandproceduresandensuringthatbrokerageconductwasincompliancewiththelaw.
145.
Dibbalsoexercisedcontroloverpersonneldecisions.
DibbandWoolfendenFailedtoSuperviseandToDetectandDeterMisconduct146.
ThroughouttheRelevantPeriod,WoolfendenandDibbfailedtodeterorrootoutthepracticesofflyingandprinting,despitetheirabilitytodosoanddespitetheirknowledgeorconstructiveknowledgethatsuchpracticeswereongoing.
Case1:18-cv-08914Document1Filed09/28/18Page25of3726147.
AtnopointduringtheRelevantPeriodwasthereaTFS-ICAPpolicyprohibitingflyingpricesorprintingtrades.
148.
WoolfendenandDibbtogetherorindividuallycouldhavedirectedthatTFS-ICAPbrokersstopflyingpricesandprintingtrades.
149.
Dibbcouldhavedevelopedandcausedtheimplementationofpoliciesandproceduresthatprohibitedanddeterredflyingpricesandprintingtrades.
150.
Forexample,DibbcouldhavedirectedVolbrokerpersonneltoblockallbrokersfromusinganyTFSaliastoflyprices.
Moreover,Dibbcouldhavecausedinstantmessagestobemonitoredforfalsetradeinformationconveyedtoclients.
V.
VIOLATIONSOFTHECOMMODITYEXCHANGEACTCOUNTIViolationsofSection4b(a)(2)oftheAct,7U.
S.
C.
§6b(a)(2)(2012)(FraudinConnectionwithSwaps)(TFS-ICAP,LLC,TFS-ICAPLtd.
,Dibb,andWoolfenden)151.
Theallegationssetforthinparagraphs1to150arere-allegedandincorporatedhereinbyreference.
152.
Section4b(a)(2)oftheActmakesitunlawful"foranyperson,inorinconnectionwithanyordertomake,orthemakingof,any.
.
.
swap,thatismade,ortobemade,fororonbehalfof,orwith,anyotherperson,otherthanonorsubjecttotherulesofadesignatedcontractmarket—(A)tocheatordefraudorattempttocheatordefraudtheotherperson;(B)willfullytomakeorcausetobemadetotheotherpersonanyfalsereportorstatementorwillfullytoenterorcausetobeenteredfortheotherpersonanyfalserecord;or(C)willfullytodeceiveorattempttodeceivetheotherpersonbyanymeanswhatsoeverinregardtoanyorderorcontractortheCase1:18-cv-08914Document1Filed09/28/18Page26of3727dispositionorexecutionofanyorderorcontract,orinregardtoanyactofagencyperformed,withrespecttoanyorderorcontractforor.
.
.
withtheotherperson.
"153.
UndertheDodd-FrankActrevisionstotheCommodityExchangeAct,FXoptionsareclassifiedasswaps,7andthereforesubjecttotheprohibitionsofSection4b(a)(2)oftheAct.
154.
Asdescribedabove,beginninginatleast2008andcontinuingtoatleastAugust2015,brokersemployedbyTFS-ICAP,LLCcommunicatedfalseinformationaboutswaps—specifically,falseinformationaboutFXoptionspricesandtransactions—tomarketparticipantslocatedintheUnitedStatesandabroad.
Suchinformationwasmaterialtomarketparticipants.
Thebrokerskneworactedwithrecklessdisregardthattheinformationconveyedwasfalseandtheycommunicateditwiththeintenttodeceivethemarketparticipants.
Sinceatleast2012,thisconductviolatedSection4b(a)(2)(A)-(C)oftheAct.
155.
Asdescribedabove,fromatleastJanuary2014throughJune2014,brokersemployedbyTFS-ICAPLtd.
communicatedfalseinformationaboutswaps—specifically,falseinformationaboutFXoptionspricesandtransactions—tomarketparticipantslocatedinthe7In1997,theSupremeCourtconstruedSection2(c)(1)(A)oftheActtoexcludeFXoptioncontractsfromCFTCjurisdiction.
SeeDunnv.
CFTC,519U.
S.
465(1997).
UndertheDodd-FrankActrevisionstotheCommodityExchangeAct,however,FXoptionsareclassifiedasswaps,see7U.
S.
C.
§1a(47)(A)(i)(2012),overwhichtheActnowexpresslyconfersCommissionjurisdiction,see7U.
S.
C.
§2(c)(2)(A)(ii)(2012).
ADepartmentofTreasurydeterminationandCommissionRegulationsclarifythat,althoughcertainforeignexchangederivativeshavebeenexcludedfromtheAct'sjurisdictionpursuanttotheTreasuryexemption,foreignexchangeoptionshavenot.
SeeDeterminationofForeignExchangeSwapsandForeignExchangeForwardsUndertheCommodityExchangeAct,77Fed.
Reg.
69,694,at69,695(Nov.
20,2012)("Foreignexchangeoptions,currencyswaps,andNDFs(asdiscussedbelow)maynotbeexemptedfromtheCEA'sdefinitionof''swap''becausetheydonotsatisfythestatutorydefinitionsofaforeignexchangeswaporforward.
");seealso17C.
F.
R.
§1.
3(2018)("swap":"Forpurposesofsections1a(24)and1a(25)oftheCommodityExchangeActandthisdefinition,thefollowingtransactionsarenotforeignexchangeforwardsorforeignexchangeswaps:…(B)acurrencyoption,foreigncurrencyoption,foreignexchangeoption,orforeignexchangerateoptionCase1:18-cv-08914Document1Filed09/28/18Page27of3728UnitedStatesandabroad.
Suchinformationwasmaterialtomarketparticipants.
Thebrokerskneworactedwithrecklessdisregardthattheinformationconveyedwasfalseandtheycommunicateditwiththeintenttodeceivemarketparticipants.
ThisconductviolatedSection4b(a)(2)(A)-(C)oftheAct.
156.
Section2(a)(1)(B)oftheAct,7U.
S.
C.
§2(a)(1)(B)(2012),providesthat"theact,omission,orfailureofanyofficial,agent,orotherpersonactingforanyindividual,association,partnership,corporation,ortrustwithinthescopeofhisemploymentorofficeshallbedeemedtheactofsuchindividual,association,partnership,corporation,ortrust.
"Becausetheacts,omissionsandfailuresoftheemployeesofTFS-ICAP,LLCandTFS-ICAPLtd.
thatviolatedSection4b(a)(2)werewithinthescopeoftheiremployment,TFS-ICAP,LLCandTFS-ICAPLtd.
areliableforthoseactsconstitutingviolationspursuanttoSection2(a)(1)(B).
157.
ThroughouttheChargingPeriod,DibbandWoolfendeneachcontrolledTFS-ICAP,LLCandTFS-ICAPLtd.
employeesdirectlyorindirectlyanddidnotactingoodfaithorknowinglyinduced,directlyorindirectly,theactsofTFS-ICAP,LLCandTFS-ICAPLtd.
employeesthatconstitutetheviolationsallegedinthiscount.
Therefore,pursuanttoSection13(b)oftheAct,7U.
S.
C.
§13c(b)(2012),eachaforementionedDefendantisliableasacontrollingpersonfortheviolationsbyTFS-ICAP,LLCandTFS-ICAPLtd.
employeesofSection4b(a)(2).
158.
Section13(a)oftheActprovidesthat"anypersonwhocommits,orwhowillfullyaids,abets,counsels,commands,inducesorprocuresthecommissionof,aviolationofanyoftheprovisionsofthisAct.
.
.
orwhoactsincombinationorconcertwithanyotherpersoninanysuchviolations.
.
.
maybeheldresponsibleforsuchviolationasaprincipal.
"7U.
S.
C.
§13c(a).
BecauseWoolfendenencouragedandactedinconcertwithbrokersinNewYorkandLondon,Case1:18-cv-08914Document1Filed09/28/18Page28of3729includingNYBrokerAandNYBrokerB,toflypricesandprinttrades,andsoughtbyhisactionstomakesuchfraudulentconductsucceed,heisalsoliableforaidingandabettingthebrokers'violationsofSection4b(a)(2)pursuanttoSection13(a)oftheAct.
COUNTIIViolationsofSection6(c)(1)oftheAct,7U.
S.
C.
§9(1)(2012),andRegulation180.
1,17C.
F.
R.
§180.
1(a)(2018)(UseofManipulativeorDeceptiveDevices)(TFS-ICAP,LLC,TFS-ICAPLtd.
,Dibb,andWoolfenden)159.
Theallegationssetforthinparagraphs1to158arere-allegedandincorporatedhereinbyreference.
160.
Section6(c)(1)oftheActmakesitunlawful"foranyperson,directlyorindirectly,touseoremploy,orattempttouseoremploy,inconnectionwithanyswap,oracontractofsaleofanycommodityininterstatecommerce,orforfuturedeliveryonorsubjecttotherulesofanyregisteredentity,anymanipulativeordeceptivedeviceorcontrivance.
"161.
Regulation180.
1(a)makesit"unlawfulforanyperson,directlyorindirectly,inconnectionwithanyswap.
.
.
tointentionallyorrecklessly:(1)useoremploy,orattempttouseoremploy,anymanipulativedevice,scheme,orartificetodefraud;(2)make,orattempttomake,anyuntrueormisleadingstatementofamaterialfactortoomittostateamaterialfactnecessaryinordertomakethestatementsmadenotuntrueormisleading;[or](3)engage,orattempttoengage,inanyact,practice,orcourseofbusiness,whichoperatesorwouldoperateasafraudordeceituponanyperson.
"162.
UndertheDodd-FrankActrevisionstotheCommodityExchangeAct,FXoptionsareclassifiedasswaps,andthereforesubjecttotheprohibitionsofSection6(c)(1)oftheActandRegulation180.
1.
Case1:18-cv-08914Document1Filed09/28/18Page29of3730163.
Asdescribedabove,beginninginatleast2008andcontinuingtoatleastAugust2015,brokersemployedbyTFS-ICAP,LLCcommunicatedfalseinformationaboutFXoptionspricesandFXoptionstransactionstomarketparticipantslocatedintheUnitedStatesandabroad.
Suchinformationwasmaterialtothosemarketparticipants.
Thebrokerskneworrecklesslydisregardedthattheinformationconveyedwasfalseandtheycommunicateditwiththeintenttodeceivemarketparticipantsorwithrecklessdisregardforthefactthatitwoulddeceivethem.
Sinceatleast2012,thisconductviolatedSection6(c)(1)oftheActandRegulation180.
1(a)(1)-(3).
164.
Asdescribedabove,fromatleastJanuary2014throughJune2014,brokersemployedbyTFS-ICAPLtd.
communicatedfalseinformationaboutFXoptionspricesandFXoptionstransactionstomarketparticipantslocatedintheUnitedStatesandabroad.
Suchinformationwasmaterialtomarketparticipants.
Thebrokerskneworrecklesslydisregardedthattheinformationconveyedwasfalseandtheycommunicateditwiththeintenttodeceivemarketparticipantsorwithrecklessdisregardforthefactthatitwoulddeceivethem.
ThisconductviolatedSection6(c)(1)oftheActandRegulation180.
1(a)(1)-(3).
165.
Section2(a)(1)(B)oftheAct,7U.
S.
C.
§2(a)(1)(B)(2012),providesthat"theact,omission,orfailureofanyofficial,agent,orotherpersonactingforanyindividual,association,partnership,corporation,ortrustwithinthescopeofhisemploymentorofficeshallbedeemedtheactofsuchindividual,association,partnership,corporation,ortrust.
"Becausetheacts,omissions,andfailuresoftheemployeesofTFS-ICAP,LLCandTFS-ICAPLtd.
thatviolatedSection6(c)(1)andRegulation180.
1werewithinthescopeoftheiremployment,TFS-ICAP,LLCandTFS-ICAPLtd.
areliableforthoseactsconstitutingviolationspursuanttoSection2(a)(1)(B).
Case1:18-cv-08914Document1Filed09/28/18Page30of3731166.
DibbandWoolfendeneachcontrolledTFS-ICAP,LLCandTFS-ICAPLtd.
employeesdirectlyorindirectlyanddidnotactingoodfaithorknowinglyinduced,directlyorindirectly,theactsofTFS-ICAP,LLCandTFS-ICAPLtd.
employeesthatconstitutetheviolationsallegedinthiscount.
Therefore,pursuanttoSection13(b)oftheAct,7U.
S.
C.
§13c(b)(2012),eachaforementionedDefendantisliableasacontrollingpersonfortheviolationsbyTFS-ICAP,LLCandLtd.
employeesofSection6(c)(1)oftheActandRegulation180.
1.
167.
ThroughouttheRelevantPeriod,WoolfendenencouragedandactedinconcertwithbrokersinNewYorkandLondon,includingNYBrokerAandNYBrokerB,toflypricesandprinttrades,andsoughtbyhisactionstomakesuchdeceptiveconductsucceed.
Accordingly,pursuanttoSection13(a)oftheActheisalsoliableforaidingandabettingthebrokers'violationsofSection6(c)(1)oftheActandRegulation180.
1.
COUNTIIIViolationsofSection4c(a)(1)-(2)oftheAct,7U.
S.
C.
§§6c(a)(1)–(2)(2012)(ConfirmingFictitiousSalesandTransactionsUsedToCauseReportingofUntrueandNon-BonaFidePrices)(TFS-ICAP,LLC,TFS-ICAPLtd.
,Dibb,andWoolfenden)168.
Theallegationssetforthinparagraphs1to167arere-allegedandincorporatedhereinbyreference.
169.
Section4c(a)(1)oftheActmakesit"unlawfulforanypersontooffertoenterinto,enterinto,orconfirmtheexecutionofa'transaction'.
.
.
involvingthepurchaseorsaleofanycommodityforfuturedeliveryor.
.
.
swap,ifthetransactionisusedormaybeusedto(A)hedgeanytransactionininterstatecommerceinthecommodityortheproductorbyproductofCase1:18-cv-08914Document1Filed09/28/18Page31of3732thecommodity;[or](B)determinethepricebasisofanysuchtransactionininterstatecommerceinthecommodity.
"170.
Section4c(a)(2)oftheActdefines"transaction,"asusedinSection4c(a)(1),tomean,amongotherthings,"atransactionthat—(A).
.
.
isafictitioussale;or(B)isusedtocauseanypricetobereported,registered,orrecordedthatisnotatrueandbonafideprice.
"171.
UndertheDodd-FrankActrevisionstotheCommodityExchangeAct,FXoptionsareclassifiedasswaps,andthereforesubjecttotheprohibitionsofSection4c(a)oftheAct.
172.
Asdescribedabove,beginninginatleast2008andcontinuingtoatleastAugust2015,brokersemployedbyTFS-ICAP,LLCenteredintoandconfirmed,orcausedtheconfirmationof,theexecutionofcertainFXoptionstransactionsthatwerefictitiousandwereusedtocauseapricetoberecordedonVolbrokerandcommunicatedtoclientsthatwasnotatrueandbonafideprice.
ThisconductviolatedSection4c(a)(1)-(2)oftheAct.
173.
Asdescribedabove,fromatleastJanuary2014throughJune2014,brokersemployedbyTFS-ICAPLtd.
enteredintoandconfirmed,orcausedtheconfirmationof,theexecutionofcertainFXoptionstransactionsthatwerefictitiousandwereusedtocauseapricetoberecordedonVolbrokerandcommunicatedtoU.
S.
-basedclientsthatwasnotatrueandbonafideprice.
ThisconductviolatedSection4c(a)(1)-(2)oftheAct.
174.
Section2(a)(1)(B)oftheAct,7U.
S.
C.
§2(a)(1)(B)(2012),providesthat"theact,omission,orfailureofanyofficial,agent,orotherpersonactingforanyindividual,association,partnership,corporation,ortrustwithinthescopeofhisemploymentorofficeshallbedeemedtheactofsuchindividual,association,partnership,corporation,ortrust.
"Becausetheacts,omissionsandfailuresoftheemployeesofTFS-ICAP,LLCandTFS-ICAPLtd.
thatviolatedCase1:18-cv-08914Document1Filed09/28/18Page32of3733Section4c(a)(1)-(2)werewithinthescopeoftheiremployment,TFS-ICAP,LLCandTFS-ICAPLtd.
areliableforthoseactsconstitutingviolationspursuanttoSection2(a)(1)(B).
175.
DibbandWoolfendeneachcontrolledTFS-ICAP,LLCandTFS-ICAPLtd.
employeesdirectlyorindirectlyanddidnotactingoodfaithorknowinglyinduced,directlyorindirectly,theactsofTFS-ICAP,LLCandTFS-ICAPLtd.
employeesthatconstitutetheviolationsallegedinthiscount.
Therefore,pursuanttoSection13(b)oftheAct,7U.
S.
C.
§13c(b)(2012),eachaforementionedDefendantisliableasacontrollingpersonfortheviolationsbyTFS-ICAP,LLCandLtd.
employeesof4c(a)(1)-(2)oftheAct.
176.
ThroughouttheRelevantPeriod,WoolfendenencouragedandactedinconcertwithbrokersinNewYorkandLondon,includingNYBrokerAandNYBrokerB,toconfirm,orcausetheconfirmationof,theexecutionofcertainFXoptionstransactionsthatwerefictitiousandwereusedtocauseapricetoberecordedonVolbrokerandcommunicatedtoU.
S.
-basedclientsthatwasnotatrueandbonafideprice.
Accordingly,pursuanttoSection13(a)oftheActWoolfendenisalsoliableforaidingandabettingthebrokers'violationsofSection4c(a)(1)-(2)oftheAct.
COUNTIVViolationofRegulation166.
3,17C.
F.
R.
§166.
3(2018)(FailuretoDiligentlySupervise)(TFS-ICAP,LLC,TFS-ICAPLtd.
,Dibb,andWoolfenden)177.
Theallegationssetforthinparagraphs1to176arere-allegedandincorporatedhereinbyreference.
178.
PursuanttoRegulation166.
3,"eachCommissionregistrant,exceptanassociatedpersonwhohasnosupervisoryduties,mustdiligentlysupervisethehandlingbyitspartners,officers,employeesandagents.
.
.
ofallcommodityinterestaccountscarried,operated,advisedCase1:18-cv-08914Document1Filed09/28/18Page33of3734orintroducedbytheregistrantandallotheractivitiesofitspartners,officers,employeesandagents.
.
.
relatingtoitsbusinessasaCommissionregistrant.
"179.
Fromatleast2012to2015,TFS-ICAP,LLCwasorshouldhavebeenregisteredwiththeCommissionasanIntroducingBroker.
Throughoutthisperiod,itsemployeeswereengagedinthesolicitationoracceptanceofordersforthepurchaseandsaleofswaps.
180.
FromatleastJanuary2014toJune2014,TFS-ICAPLtd.
shouldhavebeenregisteredwiththeCommissionasanIntroducingBroker.
Throughoutthisperiod,itsemployeeswereengagedinthesolicitationoracceptanceofordersforthepurchaseandsaleofswapsforU.
S.
-basedclients.
181.
Fromatleast2012to2015,DibbandWoolfendenwere,orshouldhavebeen,registeredwiththeCommissionasassociatedpersonsofTFS-ICAP,LLC.
FromatleastJanuary2014toJune2014,DibbandWoolfendenwere,orshouldhavebeen,registeredwiththeCommissionasassociatedpersonsofTFS-ICAPLtd.
182.
ThroughouttheChargingPeriod,DibbandWoolfendenhadsupervisoryresponsibilitiesrelatingtoTFS-ICAP,LLCandTFS-ICAPLtd.
employees,whowereengagedinthesolicitationoracceptanceofordersforthepurchaseandsaleofswaps.
183.
Asdiscussedabove,duringtheChargingPeriod,DibbandWoolfendenkneworhadreasontoknowthatbrokersatTFS-ICAPwereflyingpricesandprintingtradestocustomersbasedintheU.
S.
andabroad.
Despitethisknowledge,theyfailedtodiligentlyperformtheirsupervisorydutiesorimplementanypoliciesorprocedurestoensurethatbrokersdidnotengageinthisconduct.
Asdiscussedabove,ratherthantakestepstorootoutmisconduct,Dibbtriedtocoveruporlimittheextentofdisclosuretoregulatorsandthepublic.
ThesefailuresviolatedRegulation166.
3.
Case1:18-cv-08914Document1Filed09/28/18Page34of3735184.
Asdiscussedabove,duringtheChargingPeriod,TFS-ICAP,LLC,throughitsseniormanagerialofficials,kneworhadreasontoknowthatemployeesofTFS-ICAP,LLCwereflyingpricesandprintingtradestocustomersbasedintheU.
S.
andabroad.
Despitethisknowledge,TFS-ICAP,LLCfailedtoimplementanypoliciesorprocedurestoensurethatbrokersdidnotengageinthisconduct.
ThisfailureviolatedRegulation166.
3.
185.
Asdiscussedabove,fromatleastJanuary2014toJune2014,TFS-ICAPLtd.
,throughitsseniormanagerialofficials,kneworhadreasontoknowthatemployeesofTFS-ICAPLtd.
wereflyingpricesandprintingtradestocustomersbasedintheU.
S.
andabroad.
Despitethisknowledge,TFS-ICAPLtd.
failedtoimplementanypoliciesorprocedurestoensurethatbrokersdidnotengageinthisconduct.
ThisfailureviolatedRegulation166.
3.
RELIEFREQUESTEDWHEREFORE,theCommissionrespectfullyrequeststhattheCourt,asauthorizedbySection6coftheAct,asamended,7U.
S.
C.
§13a-1(2012),andpursuanttoitsownequitablepowers:A.
EnteranorderfindingDefendantsTFS-ICAP,LLC,TFS-ICAPLtd.
,Dibb,andWoolfendenliableforviolatingSections4b(a)(2),6(c)(1),and4c(a)(1)-(2)oftheAct,7U.
S.
C.
§§6b(a)(2),9(1),6c(a)(1)-(2)(2012),andRegulations180.
1and166.
3,17C.
F.
R.
§§180.
1,166.
3(2018);B.
EnterordersofapreliminaryandpermanentinjunctionrestrainingandenjoiningDefendants,andanyoftheiraffiliates,agents,servants,employees,successors,assigns,attorneys,andpersonsinactiveconcertwiththemwhoreceiveactualnoticeofsuchorderbypersonalserviceorotherwise,from:Case1:18-cv-08914Document1Filed09/28/18Page35of3736i.
DirectlyorindirectlyviolatingSections4b(a)(2),6(c)(1),and4c(a)(1)-(2)oftheActandRegulations180.
1and166.
3;andii.
ApplyingforregistrationorclaimingexemptionfromregistrationwiththeCommissioninanycapacity,andengaginginanyactivityrequiringsuchregistrationorexemptionfromregistrationwiththeCommission;C.
EnterordersrequiringDefendantstopaycivilmonetarypenaltiesofnotmorethanthecivilmonetarypenaltyprescribedbySection6c(d)(1)oftheAct,7U.
S.
C.
§13a-1(d)(1)(2012),asadjustedforinflationpursuanttotheFederalCivilPenaltiesInflationAdjustmentActImprovementsActof2015,Pub.
L.
114–74,129Stat.
584(2015),titleVII,Section701,seeCommissionRegulation143.
8,17C.
F.
R.
§143.
8(2018),foreachviolationoftheActorRegulationsasdescribedherein,pluspost-judgmentinterest;D.
EnteranorderrequiringDefendantstodisgorge,pursuanttosuchprocedureastheCourtmayorder,allbenefitsreceived,including,butnotlimitedto,salaries,bonuses,commissions,loans,fees,revenues,andprofitsderived,directlyorindirectly,fromactsorpracticesthatconstituteviolationsoftheActandRegulationsasdescribedherein,includingpre-andpost-judgmentinterestthereonfromthedateofsuchviolations;E.
EnteranorderrequiringDefendantstopaycostsandfees,aspermittedby28U.
S.
C.
§§1920and2412(a)(2)(2012);andF.
EnteranorderprovidingsuchotherandfurtherreliefasthisCourtmaydeemnecessaryandappropriateunderthecircumstances.
Case1:18-cv-08914Document1Filed09/28/18Page36of3737VI.
JURYDEMANDPlaintiffherebydemandsatrialbyjury.
Dated:September28,2018Respectfullysubmitted,COMMODITYFUTURESTRADINGCOMMISSIONManalM.
SultanDeputyDirectorBy:__/s/SamuelWasserman______SamuelWassermanK.
BrentTomerDivisionofEnforcement140Broadway,19thFloorNewYork,NewYork10005Phone:(646)746-9700Fax:(646)746-9939Case1:18-cv-08914Document1Filed09/28/18Page37of37