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CFTC charges World Series of Poker player with manipulating gold and silver markets

Kitco News

(Kitco News) In another spoofing case, the Commodity Futures Trading Commission (CFTC) charged a Nevada metals trader who has a lucrative poker side-gig with spoofing the gold and silver futures markets.

The CFTC said that Daniel Shak, who heads a small hedge fund SHK Management LLC, entered large orders for gold and silver futures that he intended to cancel before execution while also placing orders on the opposite side of the gold or silver futures market. And this happened on hundreds of occasions.

Spoofing is a tactic of manipulating gold and silver markets by making bids or offers and canceling them before execution. The CFTC alleges that from February 2015 through March 2018, Shak engaged in this kind of activity repeatedly.

"By placing the spoof orders, Shak intentionally or recklessly sent false signals of increased supply or demand that were designed to trick market participants into executing against orders on the opposite side of the market, which he actually wanted filled," the CFTC said in a press release. "Shak's spoof orders allowed him to fill orders on the opposite side of the market sooner, at a better price, and/or in larger quantities than they otherwise would have been filled."

The CFTC is seeking civil monetary penalties, disgorgement, trading bans, and a permanent injunction against future violations of the federal commodities laws.

"These charges demonstrate once again that the CFTC will vigorously prosecute to the fullest extent of the law, misconduct that has the potential to undermine the integrity of our markets," said CFTC Acting Division of Enforcement director Gretchen Lowe.

This is not Shak's first run-in with the CFTC either. He settled back in March 2015 after being ordered not to trade during the closing minute of the gold futures markets.

Shak is also quite well known on the world poker circuit. He has participated in 150 big poker tournaments and won more than $11.7 million dating back nearly 20 years.

A decade ago, Wall Street Journal also reported that Shak made a big bet on gold, which failed and forced him to liquidate the position and return money to clients. At the time of the report, Shak's hedge fund held contracts valued at more than $850 million, which was more than 10% of the main U.S. futures market.

Spoofing has been in the mainstream headlines these past several weeks as markets digest the ongoing high-profile case involving several JPMorgan Chase traders.

After a three-week trial, a jury continues to deliberate for the sixth full day on the most significant court case impacting the precious metals market in history.

The head of JPMorgan Chase's precious metals desk Michael Nowak, gold trader Gregg Smith and executive director specializing in hedge fund sales Jeffrey Ruffo have been accused of manipulating and rigging gold and silver prices for eight years between 2008 and 2016.

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