NatWest Spoofing Manipulation of Treasuries Market Class Action

In December 2021, NatWest Markets plc pleaded guilty in a criminal case of wire fraud and securities fraud for its activities related to Treasury Futures and the secondary market for Treasury Securities. The case involved “spoofing,” or placing false orders to manipulate the markets. This class action, brought against NatWest Markets plc (NWMP) and NatWest Markets Securities, Inc. (NMSI) is based on that case, to bring some redress to others who were injured by the NatWest Markets manipulation.

The class for this action is all persons or entities who entered into transactions in Treasury Futures or options on Treasury Futures traded on a domestic exchange or transacted in Treasury Securities in the cash market, between January 1, 2008 and December 31, 2018.

Treasury securities are debt securities issued by the US government that pay interest until their maturity dates, at which the principal amount is returned to the owner. Treasury securities carry a specific rate of interest determined at the time they are issued. However, they can be bought or sold after that for a higher or lower price.

Treasury futures involve the right to buy or sell, at some date in the future, commodities such as Treasury notes or bonds. The Treasury securities and Treasury futures markets are the ones NatWest was accused of manipulating.

In December 2021, NWMP pleaded guilty in a criminal case brought by the Department of Justice (DOJ), Criminal Division, Fraud Section and the US Attorneys’ Office for the District of Connecticut (USAO-CT). The complaint for this class action alleges, “NWMP pleaded guilty to criminal wire fraud and securities fraud charges for engaging in unlawful trading activities in the markets for U.S. Treasury Futures and the secondary (cash) market for U.S. Treasury Securities…”

NWMP was forced to pay around $35 million as a fine, restitution, and forfeiture and agreed to be on probation for three years afterwards, with an independent compliance monitor.

The “unlawful trading activities” included manipulating the market for Treasury futures and Treasury securities via what the complaint claims is “at least hundreds of episodes of spoofing” the secondary cash market for Treasury securities and the Treasury futures market.

Spoofing involves placing orders in the markets and then canceling them before they are executed. These orders, the complaint alleges, were intended “to send false and illegitimate supply and demand signals to an otherwise efficient market…” By doing that, the complaint claims, they “caused prices in both markets to be artificial throughout the [period covered in this class action] to benefit their trading positions financially, at the expense of other investors…”

Article Type: Lawsuit
Topic: Securities
Tags: Market Manipulation, Securities