Banking and Finance Law Daily Justice Department adds superseding indictment charges for racketeering conspiracy
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Monday, November 18, 2019

Justice Department adds superseding indictment charges for racketeering conspiracy

By Colleen M. Svelnis, J.D.

The Department of Justice has added a superseding indictment against a former employee in a New York bank in a racketeering conspiracy case involving the manipulation of the markets for precious metals futures contracts.

The Department of Justice has filed a superseding indictment in the U.S. District Court for the Eastern District of Illinois in a case involving racketeering. The indictments allege that the co-conspirators placed orders to buy and sell precious metals futures contracts with the intent to cancel those orders before execution, including attempts to artificially affect prices and to profit by deceiving other market participants. The superseding indictment is against Jeremy Ruffo, a former salesperson in the New York offices of a U.S. global banking and financial services companies. The New York headquartered bank, operated a global commodities trading business that included the trading of precious metals futures contracts and options. The superseding indictment follows the original indictment filed on Aug. 22, 2019 (U.S. v. Smith, Case No. 19CR669).

According to the indictments, the conspirators placed deceptive orders with the intent to fraudulently and artificially move the price of a given precious metals futures contract in a manner that would allow the defendants and their co-conspirators to generate trading profits and avoid losses for themselves and other members of the conspiracy. The superseding indictment alleged that Ruffo participated in a racketeering conspiracy in connection with the manipulation of the markets for precious metals futures contracts spanning over eight years and involving thousands of unlawful trading sequences. According to a Department of Justice release, the case is the result of an ongoing investigation by the FBI’s New York Field Office, along with the assistance from the Commodity Futures Trading Commission’s Division of Enforcement.

Russo was charged with conspiracy under the Racketeer Influenced and Corrupt Organizations Act, conspiracy to commit wire fraud affecting a financial institution, bank fraud, commodities fraud, price manipulation, and spoofing. The superseding indictment incorporates the charges filed in the original indictment against three individuals, Gregg Smith, Michael Nowak, and Christopher Jordan. They are charged with RICO conspiracy, conspiracy to commit wire fraud affecting a financial institution, bank fraud, commodities fraud, price manipulation, and spoofing.

The Justice department alleges that, between approximately March 2008 and August 2016, Ruffo along with the other defendants and co-conspirators were members of the bank’s global precious metals desk in New York, London, and Singapore, were members of an enterprise and conducted the affairs of the desk through a pattern of racketeering activity, specifically, wire fraud affecting a financial institution and bank fraud.

The superseding indictment alleges that the defendants engaged in widespread spoofing, market manipulation, and fraud while working on the precious metals desk at the bank through the placement of orders they intended to cancel before execution in an effort to create liquidity and drive prices toward orders they wanted to execute on the opposite side of the market.

The purposes of the racketeering conspiracy included:

  • maximizing trading profits and minimizing trading losses through unlawful trading practices;
  • promoting and enhancing the racketeering conspiracy; and
  • concealing the unlawful activities from scrutiny by their employers and law enforcement.

In order to effect the conspiracy, the indictment alleges that the defendants and their co-conspirators placed orders to buy and sell precious metals futures contracts with the intent to cancel those orders before execution, including in an attempt to artificially affect prices and to profit by deceiving other market participants. By placing these deceptive orders, the Justice Department alleges, the defendants and their coconspirators intended to inject false and misleading information about the genuine supply and demand for precious metals futures contracts into the markets, and to deceive other participants in those markets into believing something untrue, namely that the visible order book accurately reflected market-based forces of supply and demand. The indictment further alleges that the defendants and their co-conspirators intended to create the false impression in the market of increased supply in an effort to drive down the prices of those futures contracts.

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