The Commodity Futures Trading Commission secured federal court orders imposing substantial penalties against two former bank employees for spoofing activities in precious metals futures markets, the agency announced Thursday.
The U.S. District Court for the Northern District of Illinois entered consent orders against Gregg Smith of New York and Michael Nowak of New Jersey, both of whom worked at a major bank when they engaged in the illegal trading practices. The orders impose a combined $350,000 in civil monetary penalties and significant trading restrictions.
Under the court orders, Smith must pay a $200,000 civil monetary penalty and faces a three-year ban from trading in CFTC markets or registering with the commission. Nowak received a $150,000 civil monetary penalty and a six-month trading and registration ban. Both defendants must also cease and desist from further violations of the spoofing prohibition under the Commodity Exchange Act.
Spoofing involves placing and quickly canceling large orders to create artificial market activity and mislead other traders about supply and demand. The practice has become a key enforcement priority for the CFTC as regulators work to maintain market integrity in derivatives trading.
The consent orders resolve a CFTC enforcement action originally filed in September 2019. The case demonstrates the agency's commitment to pursuing market manipulation cases through both civil and criminal channels, as both defendants also faced federal criminal prosecution.
In the related criminal case, Smith and Nowak were convicted of fraud, attempted price manipulation, and spoofing. The criminal proceedings resulted in prison sentences for both men. Smith received a two-year prison term and was ordered to pay a $50,000 fine in August 2023, while Nowak was sentenced to one year and one day in prison with a $35,000 fine.
The dual civil and criminal enforcement approach reflects the CFTC's coordinated efforts with the Department of Justice to combat market manipulation. Criminal penalties focus on punishment and deterrence, while civil enforcement allows the CFTC to impose industry-specific sanctions like trading bans and registration restrictions.
In a separate enforcement matter announced Thursday, the CFTC secured a federal court order against Peter Miller of Miami and his firm Omerta Capital LLC for misappropriating confidential information and fictitious trading. The U.S. District Court for the Southern District of Texas imposed $335,788 in combined disgorgement and civil penalties.
Under that consent order, Miller and Omerta Capital must pay $135,788 in disgorgement representing unlawful gains, plus a $200,000 civil monetary penalty. The defendants face an 18-month ban from registration and trading, along with a five-year prohibition on block trading.
The Miller case originated from a CFTC complaint filed in December 2021 and amended in December 2022. The Department of Justice also filed criminal charges against Miller in a related proceeding.
These enforcement actions highlight the CFTC's continued focus on market manipulation schemes that undermine the integrity of derivatives markets. Spoofing cases have become increasingly common as the agency develops sophisticated surveillance tools to detect suspicious trading patterns.
The precious metals spoofing case against Smith and Nowak represents part of a broader crackdown on manipulative trading practices in metals markets. Banks and trading firms have faced increased scrutiny over their compliance programs and employee conduct in these markets.
For market participants, these cases underscore the importance of robust compliance systems and employee training on prohibited trading practices. The significant penalties and lengthy trading bans demonstrate the career-ending consequences that spoofing violations can carry.
The CFTC has authority to seek civil penalties of up to $1 million per violation for spoofing under recent statutory amendments. The agency also regularly coordinates with criminal prosecutors to ensure comprehensive enforcement against market manipulation.
Trading firms should note that the CFTC holds both individuals and their employers potentially liable for spoofing violations. Firms can face substantial penalties if they fail to maintain adequate supervision and compliance systems to prevent manipulative trading.
These enforcement actions reflect the CFTC's commitment to pursuing cases across multiple years, as demonstrated by the timeline from the 2019 civil filing to the 2026 resolution. The agency continues to investigate and prosecute market manipulation cases as a core mission priority.
The consent orders provide clarity on the types of conduct that constitute spoofing violations while establishing penalty benchmarks for similar future cases. Market participants should review their trading practices and compliance programs in light of these enforcement precedents.