A group of U.S. regulators, including the Department of Justice (DOJ), has imposed a multi-million dollar fine on a banking giant to settle criminal charges that the company cheated the Treasury market.
The DOJ says TD Bank’s registered broker-dealer, TD Securities, has accepted the terms of a deferred prosecution agreement (DPA) charging the company with one count of fraud for market manipulation.
Prosecutors allege that Jeyakumar Nadarajah, who worked at the firm’s U.S. Treasury trading desk, placed tens of billions of dollars in fraudulent orders in a spoofing manipulation scheme between April 2018 and May 2019.
Spoofing is an illegal trading practice of placing orders intended to be canceled to create a false perception of supply or demand.
The DOJ says Nadarajah, who faces individual criminal charges, used the technique to drive up bond prices on the secondary market to desired levels before any actual trades were executed.
Under the DPA, TD Securities has agreed to pay $15.5 million in criminal fines and forfeitures, with $4.7 million going to market participants harmed by the bank’s practices.
“TD Securities placed hundreds of orders to buy and sell U.S. Treasury securities that it never intended to execute, to deceive market participants and manipulate prices by creating the false appearance of supply and demand. Such attempts to profit through unlawful trading undermine public confidence in U.S. Treasury markets and defraud other market participants.”
The Securities and Exchange Commission (SEC) is also using TD Securities to manipulate the Treasury market to violate securities laws while failing to provide reasonable oversight of Nadarajah.
The SEC says TD Securities will pay $400,000 in disgorgement and $6.5 million in civil penalties.
Meanwhile, TD Securities also agreed to pay a $6 million fine to the Financial Industry Regulatory Authority (FINRA) to settle similar charges.
According to the Federal Reserve, as of June 30, 2024, TD Bank is the tenth largest commercial bank in the U.S. with more than $370.332 billion in consolidated assets.
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