March 29, 2018

The Second Circuit on Thursday disagreed with a lower court’s decision to toss a proposed class action alleging Tower Research Capital LLC manipulated Korean futures contract prices on an electronic trading system, saying the allegations plausibly claim the trades are “domestic transactions” and subject to federal law.
 
While a New York federal judge found in February 2017 that the Chicago Mercantile Exchange Globex Platform was not a registered exchange and that trades of the contracts matched through the platform were not subject to the Commodities Exchange Act, the unanimous panel vacated the dismissal after finding that the proposed investor class sufficiently pled they incurred liability for their trades in the U.S.
 
Since 2014, the Korean investors have claimed that Tower Research and its founder Mark Gordon made fake trades on CME Globex to manipulate the prices of Korean futures contracts on Korea’s derivatives securities exchange during the exchange’s off hours. The investors claim the firm had no intention of having their orders matched and made approximately $14.1 million through the tactic, known as “spoofing.”
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“The Second Circuit judges’ decision is important because it recognizes that investors who traded on CME Globex and other platforms are protected by the Commodity Exchange Act when irrevocable liability for their trades occurs in the United States,” attorney for the investors Michael Eisenkraft said in a statement. “We look forward to the case proceeding and to hopefully achieving some measure of justice for the class.”
 
The investors are represented by Michael Eisenkraft, J. Douglas Richards, Richard A. Speirs and Times Wang of Cohen Milstein Sellers & Toll PLLC.
 
The complete article can be accessed here.