--

. Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 1 of 36 PageiD #:1 

UNITED STATES DISTRICT COURT 


FOR THE NORTHERN DISTRICT OF ILLINOIS, 


EASTERN DIVISION 


U.S. COMMODITY FUTURES TRADING 

COMMISSION, 

PLAINTIFF, 

v. 

IGOR B. OYSTACHER and 

3 RED TRADING LLC, 

DEFENDANTS. 

CIVIL ACTION NO. 

Complaint for Injunctive and Other 

Equitable Relief and Civil Monetary 

Penalties Under the Commodity 

Exchange Act 

JURY DEMANDED 

COMPLAINT 

1. Section 747 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 

2010, Pub. L. No. 111-203, § 747, 124 Stat. 1376, 1739, added a new section of the Commodity 

Exchange Act ("Act"), 7 U.S.C. §§ 1 et seq. (2012), to, inter alia, prohibit disruptive trading 

practices in the commodity futures markets, including trading activity of the character of, or 

commonly known to the trade as, "spoofing," in legislation enacted to reduce risk, increase 

transparency, and promote market integrity within the financial system. 

2. From December 2011 tht·ough at least January 2014 (the "relevant period"), Igor B. 

Oystacher ("Oystacher") and the company he owns and controls, 3 Red Trading LLC ("3 Red") 

(collectively "Defendants"), intentionally and repeatedly engaged in a manipulative and deceptive 

spoofing scheme while placing orders for and trading futures contracts ("futures'') on multiple 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 2 of 36 PageiD #:2 

registered entities. Their scheme created the appearance of false market depth that Defendants 

exploited to benefit their own interests, while harming other market participants. 

3. Oystacher and 3 Red engaged in this scheme by manually placing large (at least 

doubling the number of contracts offered or bid at those price levels, or better) passive order(s) on 

one side of the market at or near the best bid or offer price, which were intended to be canceled 

before execution. Defendants placed these order(s) (the "spoof orders") through accounts owned by 

3 Red to create the false impression ofmarket depth and book pressure in a cettain direction (to 

either buy or sell) and induce other market participants into placing orders on the same side of the 

market and at similar pl'ice levels as the spoof orders. The Defendants would then cancel or attempt 

to cancel all ofthe spoof order(s) before they were executed and virtually simultaneously "flip" 

their position from buy to sell {ot· vice versa) by placing at least one aggressive order on the other 

side ofthe market at the same or better price to trade with market participants that had been induced 

to enter the market by the spoof orders they just cancele~. This strategy allowed Defendants to buy 

or sell futures contracts in quantities and/or at price levels that would not have otherwise been 

available to them in the market, absent the spoofing conduct. 

4. Oystacher and 3 Red applied their pattern of manipulative and deceptive spoofing on 

at least fifty-one trading days between December 2011 and January 2014, while trading contracts in 

at least five futures products on at least four exchanges: (1) the Commodity Exchange Inc.'s 

("COMEX") March 2012 copper futures contract ("copper") on December 1, 2, 5-9, 12-16, and 19­

20, 2011; (2) the New York Mercantile Exchange's ("NYMEX") spot crude oil futures contract 

("crude oil") on May 7, 9-11, 2012; (3) the NYMEX's spot month natural gas contract ("natural 

gas") on November 30 and December 3-4, 2012; {4) the CBOE Futures Exchange's ("CFE") 

March 2013 volatility index futures contract ("VIX") on February 19-22, 25-28, and March 1, 4-5, 

2 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 3 of 36 PageiD #:3 

2013, and the Apri12013 VIX contract on March 6, 7, 11, 12, 18-21, 2013; and (5) the Chicago 

Mercantile Exchange's ("CME") spot month E-Mini S&P 500 futures contract on June 11-12, 

2013, December 16-19,2013, and January 6-10,2014 (collectively "the relevant markets'' and 

"Appendix dates"). 1 Oystachet· and 3 Red were the largest traders in the respective contracts for 

copper, natural gas, VIX, and E-Mini S&P 500 futures, and the third largest trader in the spotmonth contract for crude oil futures (as measured by number of contracts traded) during these 

periods, despite the presence of thousands of other traders in these markets. 

5. These repeated and intentional violations of the Act and the Commission 

Regulations promulgated thereunder ("Regulations"), 17 C.F.R. §§ 1 et seq. (2014), pose a serious 

threat to the integrity of the markets for these futures contracts. 

6. By this conduct and further conduct described herein, Defendants Oystacher, 

individually and on behalf of 3Red, and 3 Red have engaged, are engaging, or are about to engage 

in acts and practices that violate Section 4c(a)(5)(C) of the Act, 7 U.S.C. § 6c(a)(5)(C) (2012), 

which makes it unlawful for any person to engage in trading or conduct on a registered entity that is 

of the character of or commonly known to the trade as "spoofing," as well as Section 6(c)(1) of the 

Act, 7 U.S.C. § 9(1) (2012), and CFTC Regulation 180.1, 17 C.F.R. § 180.1 (2014), which make it 

unlawful for any person to employ or attempt to use or employ any manipulative or deceptive 

device, scheme, or artifice in connection with commodity futures. 

7. During the relevant period, Oystacher operated and controlled 3 Red, and is 

therefore liable for this entity's conduct pursuant to Section 13(b), 7 U.S.C. § 13(b) (2012). 

Oystacher committed the acts described herein within the course and scope of his employment at, or 

1 An Appendix identifying flip and spoof ordet·s, by date and time, is attached as Exhibit A to the 

Complaint. 

3 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 4 of 36 PageiD #:4 

agency with, 3 Red, and 3 Red is therefore liable under Section 2(a)(I)(B) of the Act, 7 U.S.C. § 

2(a)(l)(B) (2012), and Regulation 1.2, 17 C.P.R.§ 1.2 (2014), as a principal for its agents' acts, 

omissions or failures. 

8. Accordingly, pursuant to Section 6c ofthe Act, 7 U.S.C. § 13a-l (2012), the CFTC 

brings this action to enjoin Defendants' unlawful acts and practices, and to compel Defendants' 

compliance with the Act and Regulations. In addition, the CFTC seeks civil monetary penalties and 

remedial relief, including but not limited to, trading prohibitions, disgorgement, pre-and postjudgment interest, and such other t•elief as the Court may deem necessary and appropriate. 

I. JURISDICTION AND VENUE 

9. This Court has jurisdiction over this action pursuant to Section 6c of the Act, 

7 U.S.C. § 13a-l (2012), which authorizes the Commission to seek injunctive relief against any 

person, or to enforce compliance with the Act, whenever it shall appear to the Commission that 

.such person has engaged, is engaging, or is about to engage in any act or practice constituting a 

violation of any provision of the Act, or any rule, regulation, ot· order thereunder. 

10. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. 

§ 13a-1 (e) (20 12), in that Defendants reside in this District, transact business in this District, and 

the acts and practices in violation of the Act have occurred, are occurring, or are about to occur 

within this District. 

II. THE PARTIES 

11. Plaintiff U.S. Commodity Futures Trading Commission is an independent federal 

regulatory agency that is charged by Congress with the responsibility for administering and 

enforcing the provisions of the Act, 7 U.S.C. §§ I et seq. (2012), and the Regulations promulgated 

thereunder, 17 C.P.R. §§ 1 et seq. (2014). One of its core responsibilities is to protect the public 

4 

Case: 1:15~cv-09196 Document#: 1 Filed: 10/19/15 Page 5 of 36 PageiD #:5 

interest by deterring and preventing manipulation of the commodity markets or futures markets as 

well as other disruptions to market integrity. See 7 U.S.C. § 5(b) (2012). 

12. Defendant Igor B. Oystacher is a founder, President and Chief Executive Officer of 

3 Red, a proprietary futures trading company, as well as its principal trader. He was a principal and 

majority owner of 3 Red during the relevant period. He was responsible for developing the trading 

strategy and placing the orders which constitute the violations of the Act and Regulations. 

Oystacher resides in Chicago, Illinois, and has never been registered with the Commission. 

13. Defendant 3 Red Trading LLC is a proprietary futures trading finn, incorporated as 

a limited liability company under the laws of Delaware, and located at 440 S. LaSalle Street, Suite 

2200, Chicago, Illinois 60605. 3 Red was first incorporated in June 2011 and continues to operate 

at the time of this filing. 3 Red has never been registered with the Commission. 

Other Entities 

14. The CME Group, Inc. is a Delaware corporation with its principal place of business 

in Chicago, Illinois, that is the holding company and parent of four designated contract markets 

("DCMs"): the CBOT, CME, NYMEX, and COMEX. 

15. The CBOE Futures Exchange, LLC ("CFE") is a registered DCM and Delaware 

corporation with its principal place of business in Chicago, Illinois. 

III. STATUTORY PROVISIONS 

16. Spoofing. Section 4c(a)(S)(C) ofthe Act, 7 U.S.C. § 6c(a)(5)(C) (2012), makes it 

unlawful for any person to engage in trading or conduct on a registered entity that is of the character 

of or commonly known to the trade as "spoofing." Section 4c(a)(S)(C) explains "spoofing" as 

"bidding or offering with the intent to cancel the bid or offer before execution." 

17. Employment of a Manipulative or Deceptive Device or Contrivance. Section 

6(c)(l) ofthe Act, 7 U.S.C. § 9(1) (2012), and Regulation 180.1, 17 C.F.R. § 180.1 (2014), make it 

5 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 6 of 36 PageiD #:6 

unlawful for any person to intentionally or recklessly employ, or attempt to use or employ any 


manipulative device, scheme, or artifice in connection with commodity futures. 


IV. FACTS 

A. Factual Background 

18. A Futures Contract is an agreement to purchase or sell a financial instrument or 

physical commodity for delivery or cash settlement in the future at a price determined at initiation 

of the contract that obligates each party to the contract to fulfill the contract at the specified price. 

Futures contracts are used to assume or shift price risk, and may be satisfied by cash settlement, 

delivery, or offset. Futures contracts are commonly used to hedge risks or to speculate on the price 

of commodities. 

19. A Spot-Month Contract (or "front month contract") refers to the futures contract 

with the delivery date closest to the present date. It is often the most liquid contract month in a 

given futures contract. 

20. The CME Group's electronic trading platform, Globex, offers market participants 

the opportunity to electronically trade COMEX copper, NYMEX crude oil, NYMEX natural gas, 

and E-Mini S&P 500 futures, among other futures contracts. The CFE's electronic trading 

platform, "Command platform" offers electronic trading in its VIX futures contracts. These 

electronic trading platforms are open-access marketplaces that allow market participants to view the 

aggregated book of visible limit orders and prices for futures contracts and enter their own orders, 

and employ pre-defined sets of trade matching rules to execute buy orders opposite sell orders for 

specific quantities at specific prices. 

21. An Order, as used for electronic trading on CME and CFE markets, is a request 

submitted to an exchange to buy ("bid") ot· sell ("offer" or "ask") a given futures contract that has 

been acknowledged by an exchange and entered into an exchange's order book. An order may be 

6 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 7 of 36 PageiD #:7 

for one or more contracts or "lots." An "order cancellation" is the termination of a pending order 

by the trader that placed the order before it is fully "executed" or "filled" by being matched with an 

"opposite" (buy or sell) order for the same or better price. The period of time an order is pending in 

the market before final execution or cancellation is referred to as its "duration." 

22. When a "buy" or "sell" order is submitted to an exchange's electronic trading 

system, the order becomes part of the Order Book. The Order Book is the electronic market 

structure where a trade matching algorithm is applied to posted buy and sell orders matching them 

to each other with certain priorities for execution, as discussed below. 

23. Market participants who want to trade electronically may view aggregated limit 

Order Book data known as market depth data to see prices and the current aggregated numbers of 

visible orders and contracts at ten price levels from the lowest priced order to sell to the highest 

priced order to buy ("top of the market," "best bid and offer,'' or "BBO''). The Bid-Ask Spread is 

the difference between the lowest priced order to sell and the highest priced order to buy. 

24. Both the CME's and CFE's electronic trading platforms (Globex and Command 

platform) employ a First In First Out ("FIFO") methodology to match orders to buy and sell. 

FIFO functions such that all of the orders at the best available bid or ask price must be executed or 

removed before the pending orders at the next available best bid or ask price can be executed. 

Multiple orders at one price level will be filled in the order they are placed according to the 

principle of"time and price priority." The "best" bid price is the highest available price for buy 

orders that are posted in the market. The "best" ask or offer price is the lowest available price for 

sell orders that are posted in the market. "Better" prices refer to higher prices for buy orders or 

lower prices for sell orders. 

7 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 8 of 36 PageiD #:8 

25. An Aggressive Order is one that crosses the bidMask spread at time of entry. In 

other words, an aggressive buy order will be priced at or above the lowest priced sell order (best 

offer/ ask) in the book and an aggressive sell ordet· will be priced at or below the highest pending 

buy order (best bid). An aggressive order will be immediately executed, at least in part, and fully 

executed if enough contracts are posted on the Order Book at that price or better, to fill the order. 

26. A Passive Order is one that is at the same or worse price than either the lowest 

existing sell order or the highest existing buy order at time of entry. Passive orders are said to 

"rest" in the book and will only result in a trade if an aggressive order from another trader matches 

with the order. 

27. An Iceberg Order, also known as a hidden quantity order, is an order type offered 

by certain designated contract markets on electronic trading platforms whose order quantities (i.e., 

number of contracts) are only partially visible in the Order Book to other market patticipants. 

During the relevant time, market participants were able to place buy or sell orders as iceberg orders 

in the NYMEX's natural gas and oil contracts, the COMEX's copper contract, and the CME's EMini S&P 500 contract. The use of iceberg orders was not available for market participants trading 

the CFE' s VIX contract. 

28. Boo){ Balance refers to the numeric relationship between the number of pending 

("resting") visible contracts offered to buy on one side ofthe mat·ket and contracts offered to sell on 

the other side of the market. Many market participants (including those employing automated 

trading algorithms) rely on the information contained in the Order Book and consider it when 

making trading decisions. For instance, if the aggregate size and number of sell orders significantly 

outweighs the total aggregate size and number of buy orders, market participants may believe that 

book balance indicates that supply is exceeding demand and a price drop is imminent and may 

8 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 9 of 36 PageiD #:9 

decide to place orders to sell. Many market participants utilize algorithmic trading programs that 

analyze the market for changes in the price, number, size, and balance of orders/contracts visible in 

the Order Book at vatious price levels and use that information to make trading decisions. 

Likewise·, orders which substantially change the volume of contracts bid or offered at one or more 

price levels may be said to create Book Pressure on that side ofthe market. Consequently, 

changes in the visible orders on electronic trading platforms can affect market participants' trading 

conduct, thereby affecting liquidity and/ot· market prices for futures contracts, in copper, oil, natural 

gas, E-Mini S&P 500, and VIX. 

29. Volume is the number of futures contracts purchased or sold during a specified 

period of time. 

30. An Automated Trading System, "ATS," or Algorithmic Trading Program, or 

"Algo" is computer trading software that is programmed to generate and send orders to trade 

futures contracts based on pre-programmed trading instructions. The algorithms can automatically 

place, cancel and modify orders in response to the appearance of certain market conditions, 

including changes in the Order Book. 

31. A long position in a futures contract consists of one or more buy orders that have 

been executed but have not yet closed with an offsetting sale or delivery. Depending upon the 

terms of the futures contract, the holder of a long position is obligated to offset prior to the delivery 

period, or to accept delivery of a commodity. Financial futures like the E-Mini S&P 500 and VIX 

contracts are settled exclusively in cash. The holder of a long position profits from a rise in the 

price ofthe futut·es contract. 

32. A short position in a futures contract consists of one or more sell orders that have 

been executed but have not yet closed with an offsetting purchase or delivery. The holder of a short 

9 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 10 of 36 PageiD #:10 

position is obligated to offset prior to the delivery period, or else physically deliver or financially 

settle with the holder of a long position. The holder of a short position profits from a fall in the 

price of the contract. 

B. Market Fundamentals 

33. The vast majority of trading in Copper, Crude Oil, Natural Gas, VIX, and E-Mini 

S&P 500 futures contracts is conducted electronically. In electronic trading, orders may be entered, 

modified, and canceled through a computer portal to the electronic trading platform. Both 

automated trading programs and individual/manual traders may trade through such portals. 

i. COMEX Copper Futures Contract 

34. The COMEX copper futures contract is regularly traded for delivery during the 

current calendar month, the next 23 calendar months, and any other March, May, July, September, 

or December month falling within the 60-month period beginning with the current month. One 

delivery contract is equal to 25,000 pounds of copper. The March 2012 COMEX Copper Futures 

Contract carried an average daily trading volume of approximately 40,662 contracts on the relevant 

dates. 

35. Prices of the COMEX Copper futures contract are quoted in cents per pound. 

During the relevant time period, the COMEX Copper futures contract traded between 

approximately 326.70 and 361.55 cents per pound, which equates to a price of $81,675 to 

$90,387.50 per contract. 

36. Prices of the COMEX Copper futures contract move in increments of $0.0005 per 

pound, known as a "tick." The movement in price of one "tick" results in a change in the value of 

the contract by $12.50. 

10 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 11 of 36 PageiD #:11 

37. During the relevant dates, the trading day for COMEX copper began on Globex at 

5:00p.m. CST and continued to 4:15p.m. CST the next day. Trading of copper on Globex closed 

during the period between 4:15p.m. and 5:00p.m. CST each day. 

ii. NYMEX Crude Oil Futures Contract 

38. The NYMEX crude oil futures contract for Light Sweet Crude Oil (CL) is regularly 

traded for delivery each month during the current year and the following five years. One delivery 

contract is equal to 1,000 barrels of crude oil. The spot-month NYMEX Crude Oil Futures Contract 

carried an average daily trading volume of approximately 294,048 contracts on the relevant dates. 

39. Prices of the NYMEX crude oil futures contract are quoted in dollars per barrel. 

During the relevant time period, the NYMEX crude oil futures contract traded between 

approximately $96.13 and $97.94 dollars per barrel, which equates to a price of$96,130 to $97,940 

per contract. I _ 

40. Prices ofthe NYMEX crude oil futures contract move in increments of$0.01 per 

barrel, known as a "tick." The movement in price of one "tick" results in a change in the value of 

the contract by $10. 

41. During the relevant dates, the trading day for NYMEX crude oil began on Globex at 

6:00 p.m. and continued to 5:15 p.m. EST the next day. Trading closed from 5: 15 p.m. until 6:00 

p.m. EST each day. 

iii. NYMEX Natural Gas Futures Contract 

42. The NYMEX Henry Hub natural gas contract (NG) is traded for delivery on a 

monthly basis throughout each year. One delivery contract is equal to 10,000 million British 

thermal units (mmBtu). The spot-month NYMEX natural gas futures contract carried an average 

trading volume of approximately 251,536 contracts per day on the relevant dates. 

11 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 12 of 36 PageiD #:12 

43. Prices of the NYMEX natural gas futures contract are quoted in dollars per mmBtu. 

During the relevant time period, the NYMEX natural gas futures contract settled between 

approximately $3.539 and $3.591 dollars per mmBtu, which equates to a price of$35,390 to 

$35,910 per contt·act. 

44. Prices of the NYMEX natural gas futures contract move in increments of $0.001 per 

mmBtu, known as a ''tick." The movement in price of one "tick" results in a change in the value of 

the contract by $10.00. 

45. During the relevant dates, the trading day for NYMEX natural gas contract began on 

Globex at 6:00p.m. EST and continued to 5:15p.m. EST the next business day. Trading closed 

from 5:15p.m. until 6:00p.m. EST each day. 

iv. CFE VIX Futures Contract 

46. The CFE VIX futures contract is regularly traded for delivery in each ofthe nine 

near-term months and quarterly after that, for five quarters. The contract multiplier for each VIX 

contract is $1000. The CFE VIX Futures Contract carried an average trading volume of 

approximately 84,796 contracts per day on the relevant dates. 

47. Prices of the CFE VIX futures contract move in increments of .05 points per 

contract, known as a "tick." The movement in price of one "tick" results in a change in the value of 

the contract by $50.00. During the relevant time period, the CFE VIX futures contract traded 

between approximately $13.90 and $17.65, which equates to a dollar value between $13,900 and 

$17,650 per contract. 

48. During the relevant dates, the regulaa· trading day for VIX began on CFE Command 

at 8:30a.m. and continued to 3:15 p.m. CST, Monday through Friday, with extended trading hours 

between 3:30 p.m. and 8:30 a.m. CST. 

12 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 13 of 36 PageiD #:13 

v. CME E-Mini S&P 500 Futures Contract 

. 49. The CME E-Mini S&P 500 futures contract is regularly traded for four contract 

months: March, June, September, and December. One contract is equal to $50 x the S&P 500 

Index. The spot-month CME E-Mini S&P 500 contract carried an average trading volume of 

approximately 2,595,554 contracts per day during the relevant dates in June 2013 and 1,608,991 

contracts per day during the relevant dates in December 2013 and January 2014. 

50. Prices of the CME E-Mini S&P 500 futures contract move in increments of .25 

index points, known as a tick. The movement in price of one "tick" results in a change in the value 

of the contract by $12.50. During the relevant time period in June 2013, the CME E-Mini S&P 500 

futures contract traded between approximately 1609.90 and 1627.I 0 index points, which equates to 

a dollar value between $80,495 and $81,355 per contract and in December 2013 and January 2014 

the CME E-Mini S&P 500 futures contract traded between approximately 1773.00 and 1837.70 

index points, which equates to a dollar value between $88,650 and $91,885 per contract. 

51. During the relevant dates, the trading day for the CME E-Mini S&P 500 futures 

contract began on Globex at 5:00p.m. and continued to 4:15p.m. CST the next day. Trading 

I 

i 

closed from 4:15p.m. until 5:00p.m. CST each day. 

C. 	 Defendants' Manipulative and Deceptive Spoofing Scheme I 1. 	 Defendants' Manipulative and Deceptive Spoofing Strategy Involved Similar f 

Conduct Across Multiple Futures Markets I 

52. 	 Oystacher and 3 Red engaged in manipulative or deceptive trading strategies that I

spoofed various mat·kets while placing orders for, and trading futures contracts through, accounts I 

~ 

owned by 3 Red during the relevant period, including in: copper during December 2011; crude oil I 

in May 2012; natural gas during November and December 2012; VIX during February and March 

2013; and the CME's E-Mini S&P 500 in June and December 2013, and January 2014. I 

13 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 14 of 36 PageiD #:14 

53. Oystacher.and 3 Red manually traded these futures markets, using a commercially 

available trading platform, which included a function called "avoid orders that cross." The purpose 

of this function is to prevent a trader's own orders from matching with one another. Defendants 

exploited this functionality to place orders which automatically and almost simultaneously canceled 

existing orders on the opposite side ofthe market (that would have matched with the new orders) 

and thereby effectuated their manipulative and deceptive spoofing scheme, as described below. 

54. Oystacher and 3 Red engaged in a similar pattern of spoofing conduct across all 

relevant markets during the relevant period, which included: 

1. 	 placing at least one, and in many instances multiple "spoof orders" on one side of the 

market with the intent to cancel these orders before execution; 

ii. 	 placing these orders at or near the best bid or offer price as passive orders, behind 

existing orders; 

iii. placing these orders for a large number of contracts, at least doubling the number of 

contracts offered or bid at those price levels or better, to create the false impression 

of market depth and book pressure on that side of the market, in order to induce 

other market participants (including both manual tl'aders and those using computer 

algorithms to make trading decisions) to place orders on the same side of the market; 

iv. 	canceling all of the spoof order(s) simultaneously within one second of entry, largely 

before they could execute; 

v. 	 using the "avoid orders that cross" functionality to place "flip" order(s) as aggressive 

order(s) which would simultaneously (within 5 milliseconds) cancel any opposite 

order(s) at the same or better price. The aggressive flip order(s), except in one 

instance, then traded against market participants that had joined the "spoof orders" 

14 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 15 of 36 PageiD #:15 

before those market participants could assess and react to the updated market 

information; and 

vi. 	often placing the aggressive flip orders as partially visible "iceberg" orders to 

maximize the likelihood they would be filled. 

55. Oystacher and 3 Red engaged in these manipulative and deceptive "flips" during the 

relevant period and at least 1316 times on the dates reflected in Exhibit A to the complaint, and in 

the process placed thousands of spoof orders in the relevant markets, as set out in the Table below. 

CoQQ_er 14 288 1633 24,354 

Crude Oil 4 324 1102 26,204 

Natural Gas 3 330 1574 29,590 

VIX 19 89 284 37,694 

E-Mini S&P 500 2 59 202 35,523 

June 2013 

E-Mini S&P 500 9 226 412 206,425 

Dec. 2013; Jan. 

2014 

Total 51 1,316 5,207 359,790 

a. 	 Use of Spoof Order(s) to Create the False Impression of Market Depth and 

Bool{ Pressure 

56. Defendants initiated their manipulative and deceptive spoofing strategy by placing 

large visible passive orders at or near the best bid or offer price to create the false impression of 

market depth and book pressure in a desired direction. They created this false appearance of market 

depth and pressure by the large number and/or size (in number of contracts) of the spoof order(s) 

they placed. From the perspective of market participants trading on the electronic platform, only 

the number of orders at various price levels and the number of contracts at each price level were 

visible; the identity of the originating market participant for each order was not visible. 

15 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 16 of 36 PageiD #:16 

Accordingly, Defendants' placement of more than one spoof order created the appearance that 

multiple market participants may have become interested in executing orders at that price. 

57. In each of the examples identified in Exhibit A, Defendants' spooforders more than 

doubled the number of contracts offered or bid at those price levels or better after their spoof orders 

were placed. The number ofspoof orders Oystacher and 3 Red placed as part of each example in 

Exhibit A ranged from one to fomteen. 

58. Defendants' spoof orders identified in Exhibit A suddenly and dramatically 

increased the number of order(s) and contracts on that side of the market at those price levels, 

creating the appearance of sudden market depth and book pressure: 

Copper 5.67 84.56 1877% 

Crude Oil 3.40 80.88 991% 

Natural Gas 4.77 89.67 1710% 

VIX 3.19 423.53 1696% 

E-Mini S&P 500 3.42 602.08 996% 

June 2013 


E-Mini S&P 500 1.82 913.38 880% 


Dec. 2013; Jan. 


2014 


59. Defendants' spoof orders created a strong (but false) signal regarding interest on one 

side ofthe market. These large spoof orders deceptively encouraged other market participants (and 

16 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 17 of 36 PageiD #:17 

their algos programmed to react to changes in book pressure) to enter orders on the same side of the 

market as the spoof orders. 

60. Oystacher and 3 Red knew or recklessly disregarded the fact that the spoof orders 

would create the false appearance of market depth and book pressure and result in misinformation 

triggering other market participants' trading activity. 

b. Placement of Spoof Orders in a Manner to Avoid being Filled 

61. Oystacher and 3 Red placed the spoof orders in a manner to avoid being filled by 

placing them as passive orders at or near the best bid or ask price level, behind existing orders, and 

canceling them less than a second after they were placed. 

62. In each ofthe incidents identified in Exhibit A, Oystacher and 3 Red placed spoof 

orders at or near the existing best bid or offer price, where most market participants focus their 

attention, yet behind orders which were already pending in the market at those price levels. This 

meant that Defendants' "spoof orders" were at risk for being filled only if the pending orders at 

those price levels were filled first, based on the Exchanges' FIFO rules. 

63. Oystacher and 3 Red further minimized the probability that the spoof orders 

identified in Exhibit A would be filled by canceling them less than one second after placing them.· 

Indeed, in some of the markets, the average duration of the spoof events for the spoof orders 

identified in Exhibit A was significantly less than one second, as shown below. 

64. The following table displays the average duration of Defendants' spoof events for 

the spoof orders identified in Exhibit A as well as the average number of orders and contracts 

already bid or offered which were positioned in front of Defendants' spoof orders at their respective 

price levels or better: 

17 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 18 of 36 PageiD #:18 

Copp_er .740 4.57 11.13 

Crude Oil .644 9.15 15.60 

Natural Gas .699 5.32 13.83 

VIX .752 8.85 87.55 

E-Mini S&P .714 35.10 175.02 

500-June 2013 

E-Mini S&P .614 38.15 229.76 

500-Dec. 

2013;Jan.2014 

c. 	 Simultaneous Cancellation of Spoof Orders and Placement of Aggressive Flip 

Order(s) 

65. Oystacher and 3 Red next placed one or more aggressive flip orders at the same or 

better price on the other side of the market (sell/buy) using the avoid orders that cross functionality. 

As a result of the entry of the aggressive flip order(s), Defendants' spoof orders at that price or 

better were immediately canceled using only one click- or push of the button. Defendants' 

cancellation of the spoof orders and "flip, to the other side happened almost simultaneously, taking 

place in less than or equal to 5 milliseconds (i.e., thousandths of a second). 

66. Defendants' use of the avoid orders that cross functionality not only prevented the 

flip orders from matching with the spoof orders, but also allowed Defendants to cancel the pending 

spoof orders and place aggressive order(s) on the other side of the market at the same or better price 

before other market participants could assess and react to the disappearance of the false market 

depth and book pressure the spoof orders had created. 

67. Defendants' decision to place "flip" orders as aggressive orders that would instantly 

match with existing orders on the other side of the bid-ask spread stands in stark contrast to the 

18 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 19 of 36 PageiD #:19 

spoof orders placed as passive orders that were not at risk for immediate execution at time of entry. 

Oystacher and 3 Red placed and canceled the spoof orders in this manner to maximize their 

opportunities to trade in quantities and/or at price levels that would not have otherwise been 

available absent the appearance of false market depth and book pressure, and the resulting joinder 

by other market participants. 

d. Defendants' Placement of the Flip Orders as Partially Visible Iceberg Orders 

68. Oystacher and 3 Red placed a high percentage of their "flip" orders (following the 

canceled spoof orders) as iceberg orders in the markets that allowed icebergs- i.e., copper, crude 

oil, natural gas, and E-Mini S&P 500. Defendants thus hid the true size of many of the flip orders, 

intended to be filled, from the market. 

69. Oystacher and 3 Red did so to maximize the likelihood that the flip orders would be 

filled and to avoid counteracting the false impression of market depth and book pressure that was 

created with the fully visible, but recently canceled, spoof orders. 

70. The following table compares the percentage of Defendants' orders in the one 

second period prior to flipping that were placed as iceberg orders 2 to the percentage of the "flip 

orders" placed as iceberg orders in the spoof incidents identified in Exhibit A: 

2 The iceberg orders placed in the one second period before the flip are not identified in Exhibit A 

as spoof orders. 

19 
Case: 1:15-cv-09196 Document #: 1 Filed: 10/19/15 Page 20 o f 36 Page iD #: 20 

Futures Coutracf % oflceberg Orders % ofIceberg Orders

Placed within 1 Sec. Placed During 5 rns 

preceding Flip at the Aft.er Flip at same or 

same or better price better price 

' " •• f! 

72.94% 

Crude O il 

Copper 0.24%

0.63% 96.60% 

Natural Gas 89.34% 

VIX 

0.19% 

NA 

CME E-Mini S&P 500 ­

NA 

0.00% 79.66%

June 2013 

CME E-Mini S&P 500 ­ 0.00% 18.58%

Dec. 20 13;Jan. 2014 

2. D etailed Examples of Defendants' Manipulative and Deceptive Spoofing Strategy 

a. Natural Gas on November 30 , 2012 

71. At 8:02:34.360 a. m. on November 30,2012, Defendants were shOtt 10 futures 

contracts in natural gas with additional pending orders to sell 182 contracts. Beginning at 

8:02:34.576 a.m., Defendants proceeded to place seven visible orders to sell a total of I 03 contracts 

behind other resting orders at the existing best offer price of $3.67 1, as illustrated below: 

20 
Case: 1:15-cv-09196 Document #: 1 Filed: 10/19/15 Page 21 of 36 PageiD #:21 

State of the Vis ible Order Book 

Prior to Defendants' Orders 

08:02:34.360 

Defendants' Order E ntry Activity 

08:02:34.576-08:02:34.918 

ORDER BOOK OYSTACHER 

Price Buy 

Orders 

Buy 

Co ntracts 

Sell 

Orders 

Sell 

Contra cts 

Buy 

Orders 

Buy 

Contracts 

Sell 

Orders 

Sell 

Contracts 

3.675 29 135 

3.674 20 35 

3.673 17 38 

3.672 18 32 - - 3.671 5 9 i f . r,"i:, 7 103 .i 

3.670 

3.669 

8 

18 

18 

26 

:~ - . 

3.668 19 33 

3.667 22 32 

3.666 15 24 

TOTALS: 82 133 89 249 7 103 

72. Defendants' seven spoof orders increased the visible market depth (measured in 

contracts offered) at the best offer price by more than II 00% compared to what was visible to 

market participants at that same price before Defendants placed these spoof orders. 

73. After Defenda nts' spoof orders appeared in the order book, other market participants 

placed orders to sell, and a new best sell/offer price of $3.670 was established, as shown below: 

21 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 22 of 36 PageiD #:22 

State of the Visible Order Book 

After Defendants' Orders 

08:02:34.951 

ORDER BOOK 

Price Buy Buy Sell Sell 

Orders Contracts Orders Contracts 

3.674 

3.673 

3.672 

3.671 

.. ·3.670. 

3.669 

3.668 

3.667 

3.666 

3.665 

TOTALS: 

19 34 

17 32 

21 41 

16 119 

3 3 .. 

9 21 

23 39 

20 30 

17 25 

13 28 

82 143 76 229 

74. The market for natural gas futures at 8:02:35.281 a.m., immediately before 

Defendants canceled their spoof orders, looked as follows: 

State of the Visible Order Book 

Prior to Defendants' Cancels 

08:02:35.281 

ORDER BOOK 

Price Buy Buy Sell Sell 

Orders Contracts Orders Contracts 

3.674 

3.673 

3.672 

3.671 

3.670 

3.669 

3.668 

3.667 

3.666 

3.665 

TOTALS: 

20 35 

19 34 

21 41 

18 121 

4 4 

9 21 

23 39 

20 30 

17 25 

13 28 

82 143 82 235 

22 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 23 of 36 PageiD #:23 

75. At 8:02:35.304 a.m., market data reflects that Defendants canceled their seven spoof 

orders at $3.671, although they had been pending less than 750 milliseconds, and none had resulted 

in any fills. Market data indicates that over the next three milliseconds, Defendants aggressively 

"flipped, and crossed the spread by placing two buy orders for a total of 50 contracts at a price of 

$3.671. Because Defendants' flip orders to buy would have been matched against their pending 

spoof orders to sell at the same price, the avoid orders that cross function in their trading platform 

automatically canceled these spoof orders. In this example, Defendants were able to almost 

simultaneously place new order(s) and cancel existing opposite orders at the same or better price· 

with a single button push. 

76. Over the next ten seconds, Defendants' aggressive flip orders to buy 50 contracts 

were filled with 39 contracts at $3.671 and 4 contracts at 3.670. About a second after the last fill, 

Oystacher and 3 Red canceled the remaining portion of one of the flip buy orders. 

77. The following table illustrates Defendants' cancel and flip activity as well as the 

state of the Order Book at 08:02:35.309 a.m., after Defendants' flip orders had been mostly filled 

and subsequently canceled: 

23 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 24 of 36 PageiD #:24 

State of the Visible Order Doole Defendants' Cancel & F lip Activity After Defe ndants' Cancel & Flip 08:02:35.304 - 08 :02:35.307 

08:02:35.309 

ORDER BOOK OYSTACHER 

Bu y Buy Sell Sell Buy Buy Sell Sell Price Orders Conh·acts Orders Contracts Orders Contracts 01·ders Contracts 

3.676 19 77 

3.675 26 132 

3.674 20 35 

3.673 18 33 ·-­

~ 

-

3.672 18 38 - 3.671 1 l [ 2 50 ; 

3.670 3 4 

3.669 15 28 

3.668 23 39 

3.667 20 30 

TOTALS: 62 102 101 315 2 50 

78 . After Defendants' flip orders were mostly filled and then partially canceled, the new 

lowest sell price was $3.672. Use of the spoof orders in thi s instance enabled Defendants to 

purchase 43 cont racts, most at a price not previous ly availab le. 

b. E-Mi ni S&P 500 on Janu ary 6, 2014 

79. At 02:0 I:45.702 p.m ., on January 6, 2014, Oystacher and 3 Red were long 130 EMini S&P 500 futures contracts, with add itional pending orders to sell 3,279 co ntracts and orders to 

buy 124 contracts. Beg innin g at 2:0 1:47.260 p.m., Defendants proceeded to place two visib le spoof 

orders to sell a tota l of 921 contracts beh ind other resting orders at the ex isting best offer price of 

$1824.00, as illustrated below: 

24 

Case: 1:15-cv-09196 Docume nt #: 1 Filed: 10/19/15 Page 25 of 36 Pagei D #: 25 

State of t he Visib le Order Book 

Prior to Defendants' Orders 

2 :01:47 .256 

Defendants' Order E ntry Activity 

2 :01:47 .260-2:01 :47.270 

ORDER BOOK OYSTACHE R 

Pr·ice Buy Buy Sell Sell 

Order s Contracts O r ders Contracts 

Buy Buy Sell Sell 

O r ders Contracts Orders Contracts 

1825.00 

1824.75 

1824.50 

1824.25 

1824.00 

1823.75 

1823 .50 

1823 .25 

1823 .00 

1822.75 

151 1442 

175 1587 

174 1368 

103 1339 

9 34 

131 615 . 

183 923 

197 1076 

163 1122 

175 1025 

r~"""· - 0. - ~-·.....,..,., .....,.,......--~

. . 2 . :"'921 

.;::__. .~ .,., ..... -­" ··:· (f.: ~ -. . . '· 

-

TOTALS: 849 3838 612 5770 2 921 

80. Defendants' spoof orde rs increased the visib le marke t depth (measured in contracts 

offered) at the best offer priCe by more than 2,700% com par ed to what was v isible to market 

participants at that same price before Oystache r and 3 Red placed the spoof orders . 

81. After Defendants' spoof orders appe ared in the order boo k, other market pa rticipants 

placed simil ar orders to se ll at $ 1 ,824 .00, as shown below at 02:0 I :47.271 p.m.: 

25 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 26 of 36 PageiD #:26 

State of the Visible Order Book 

After Defendants' Orders 

02:01:47.271 

ORDER BOOK 

Price Buy Buy Sell Sell 

Orders Contracts Orders Contracts 

1825.00 

1824.75 

1824.50 

1824.25 

1824.00 

1823.75 

1823.50 

1823.25 

1823.00 

1822.75 

TOTALS: 

151 1442 

175 1587 

174 1368 

104 1345 

32 998 

122 . 579 

182 922 

197 1076 

163 1122 

175 1025 

839 4724 636 6740 

82. TheE-Mini S&P 500 futures market at 02:01:47.561 p.m., immediately before 

Oystacher and 3 Red canceled their spoof orders, looked as follows: 

State of the Visible Order Book 

Prior to Defendants' Cancels 

02:01:47.561 

ORDERBOOI{ 

Price Buy Buy Sell Sell 

Orders Contracts Orders Contracts 

1825.00 

1824.75 

1824.50 

1824.25 

1824.00 

1823,75 

1823.50 

1823.25 

1823.00 

1822.75 

TOTALS: 

I 

149 1439 

176 1590 

174 1368 

109 1381 

36 1008 

110 538 

182 922 

197 1076 

163 1122 

175 1025 

827 4683 644 6786 

26 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 27 of 36 PageiD #:27 

83. At 02:01:47.667 a.m., market data reflects that Oystacher and 3 Red canceled their 

two spoof orders at $1,824.00, although they had been pending for about 400 milliseconds, and had 

not resulted in any fills. Market data indicates that 1 millisecond later, Defendants aggressively 

"flipped" and crossed the spread by placing a buy order for 264 contracts at a price of $1824.00. 

Because Defendants' flip order to buy would have been matched to their pending spoof orders to 

sell at the same price, the avoid orders that cross function in their trading platform automatically 

canceled their spoof orders. In this example, Defendants, with a single button push, were once 

again able to almost simultaneously place a new order and cancel an existing order at the same or 

better price. 

84. Over the next four seconds, Defendants' aggressive flip order to buy 264 contracts 

was filled at a price of$1824.00. 

85. The following table illustrates Defendants' cancel and flip activity as well as the 

state of the Order Book at 02:01:47.669 a.m., aftet· Defendants' flip order has been entered: 

27 

Case: 1: 15-cv-09196 Do cum ent#: 1 Filed: 10/19/15 Page 28 of 36 Page iD #:28 

State of the Visible Order Book Defendants' C a ncel & Flip Activity After Defendants' Cancel & F lip 02:01:47.667- 02:01:47.668 

02:01:47.669 

ORDE R BOOK OYSTACHER 

Buy Buy Sell Sell Buy Buy Sell Sell Price Orders Contracts Order s Contracts O r ders Contracts Orders Contracts 

1825.25 142 1353 


1825.00 149 1439 


1824.75 176 1590 


1824.50 174 1368 


1824.25 110 1382 


1824.00 6 197 64 

1823.75 11 6 569 


1823.50 182 922 


1823.25 197 1076 


1823.00 163 1122 


TOTALS: 664 3886 751 7132 264 

m 

86. After Defenda nts' flip o rder was fill ed, th e new lowest sel l price was $ 1 ,824.25. 

Use o fthe spoof orders in th is instance enabled Defendants to purchase 264 contracts, most at a 

pr ice not prev ious ly ava ilab le. After the immed iate executions triggered by t hei r fl ip, Defendants 

now possessed a long pos ition of 2 I 8 with res ting orders to sel l 3,279 contracts. After fully 

executing these fl ip orders, Defendants held a lo ng position of 393 contracts w it h resting orders to 

sell 3,278 contracts . 

D. Oystacher and 3 R ed I ntended to Cancel their Spoof Order s Before Execution 

87. Defendants ' pattern of placi ng visib le pass ive (spoof) o rder(s) for a large number of 

cont racts, at or near the best bid or offer price, then sim ultaneously canceling them and flipp ing to 

aggress ively take the other side of the market at the same o r better price demonstrates their intent, at 

the time they placed them, to cance l these spoof orders prior to executio n. 

28 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 29 of 36 PagelD #:29 

88. Defendants did not merely change their mind as to the direction ofthe market so 

quickly, so often, and with such precision, but rather intended to cancel these orders at the time they 

were placed. 

89. Oystacher's and 3Red's intent to cancel the spoof orders before execution is further 

demonstrated by the difference between the fill and cancellation rates for Defendants' passive spoof 

orders identified in Exhibit A compared to the aggressive flip orders which followed them. The 

following table displays the respective fill and cancellation rates between Defendants' passive spoof 

orders and aggressive "flip" orders: 

Copper 0.89% 99.11% 44.30% 55.70% 

Crude Oil 

Natural Gas 

VIX 

E-Mini S&P 500 ­

June 2013 

E-Mini S&P 500 ­

Dec.2013;Jan.2014 

1.87% 98.13% 69.83% 30.17% 

0.51% 99.49% 50.76% 49.24% 

0.94% 99.06% 37.53% 62.47% 

0.17% 99.83% 55.20% 37.90% 

0.57% 99.43% 69.39% 27.81% 

E. Oystacher and 3 Red Employed a Manipulative and Deceptive Device or Contrivance I

; as Part of their Spoofing Scheme in Each Futures Marlcet 

90. Defendants' use of the avoid orders that cross function to virtually simultaneously I 

cancel their spoof orders and flip to aggressively take the other side of the market (and trade with 

those induced to enter the market by the initial orders they canceled), constitutes employment of a 

I 

I 

device, scheme, artifice, or contrivance that was both deceptive and manipulative. 

29 


I 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 30 of 36 PageiD #:30 

91. Defendants' spoofing strategy was deceptive in that their placement and cancellation 

of large orders was not intended to result in the execution of these orders, but rather to create the 

false impression of sudden book pressure on one side of the market, so as to fraudulently induce 

other market participants to place orders at prices they otherwise would not have placed under 

regular market conditions, absent Defendants' spoofing. Their use of this strategy was 

manipulative in that it was intended to create the false appearance of market depth and book 

pressure and thereby affect the balance, number, and prices of buy and sell orders in the market in a 

manner to benefit Oystacher and 3 Red. 

V. VIOLATIONS OF THE CEA 


COUNT ONE 


SPOOFING BY OYSTACHER AND 3 RED 


92. Paragraphs 1 through 91 are realleged and incorporated herein by reference. 

93. Section 4c(a)(5)(C) of the Act, 7 U.S.C. § 6c(a)(5)(C) (2012}, makes it illegal for 

any person to engage in trading or conduct on a registered entity that is of the character of or 

commonly known to the trade as "spoofing." 

94. Oystacher and 3 Red ·engaged in spoofing during the relevant period by, among other 

things, bidding or offering with the intent to cancel the bid or offer before execution, while placing 

orders during the relevant period, including the following orders referenced in Exhibit A: 

(a) at least 1,633 orders in the COMEX copper contract on Globex with the intent to cancel 

the orders before execution on December I, 2, 5-9, 12-16, 19, and 20, 20Il. 

(b) at least I, I 02 orders in the NYMEX crude oil contract on Globex with the intent to 

cancel the orders before execution, on May 7 and 9-11, 2012. 

(c) at least 1,574 orders in the NYMEX natural gas contract on Globex with the intent to 

cancel the orders before execution, on November 30 and December 3-4, 2012. 

(d) at least 284 orders in the CFE VIX contract with the intent to cancel the orders before 

execution, on February 19-22,25-28 and March 1, 4-7, 11-12, 18-21,2013. 

30 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 31 of 36 PageiD #:31 

(e) at least 614 orders in the CME E~Mini S&P 500 contract on Globex with the intent to 

cancel the orders before execution, on June 11 and 12,2013, as well as December 16-19, 

2013 and January 6-10, 2014. 

Oystacher and 3 Red submitted and canceled these orders to create a false appearance of market 

depth and book pressure. Accordingly, Oystache1· and 3 Red violated Section 4c{a)(5)(C) of the 

Act, 7 U.S.C. § 6c(a)(5)(C) (2012). 

95. Each order for futures that Oystacher and 3 Red placed as part of their spoofing 

scheme, constitutes a separate violation of Section 4c(a)(5)(C) of the Act, 7 U.S.C. § 6c(a)(5)(C) 

(2012). 

96. Section 2(a)(l)(B) of the Act, 7 U.S.C. § 2(a)(l)(B) (2012), provides that the act, 

omission or failure of any official, agent, or other person acting for any corporation within the 

scope of his employment shall be deemed the act of the corporation. Because the actions of the 

officers, employees and agents of 3 Red, including, but not limited to Oystacher, that violated 

Section 4c(a)(5)(C) of the Act, 7 U.S.C. § 6c(a)(5)(C) (~012), were within the scope of their 

employment, 3 Red is liable for those acts constituting violations pursuant to Section 2(a)(1)(B) of 

the Act, 7 U.S.C. § 2(a)(l)(B) (2012). 

97. Oystacher controlled 3 Red, directly and indirectly, and did not act in good faith or 

knowingly induced, directly or indirectly, the acts of3 Red that constitute the violations alleged in 

this Count; therefore, pursuant to Section·t3(b) of the Act, 7 U.S.C. § 13c(b) (2012), Oystacher is 

liable as a controlling person for the violations by 3 Red of Section 4c(a)(5)(C) of the Act, 7 U.S.C. 

§ 6c(a)(5)(C) (2012). 

31 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 32 of 36 PageiD #:32 

COUNT TWO 

EMPLOYMENT OF A MANIPULATIVE AND DECEPTIVE DEVICE, 


SCHEME OR ARTIFICE BY OYSTACHER AND 3 RED 


98. Paragraphs 1 through 91 are realleged and incorporated herein by reference. 

99. Section 6(c)(1) of the Act, 7 U.S.C. § 9(1) (2012), and Regulation 180.1, 17 C.F.R. 

§ 180.1 (2014), make it unlawful to employ, or attempt to use or employ any manipulative device, 

scheme, or artifice to defraud in connection with a contract for future delivery on a registered entity. 

100. Oystacher and 3 Red employed or attempted to use or employ a manipulative or 

deceptive device, scheme, or artifice to defraud, by placing passive orders for a large number of 

contracts on one side of the market to create the false impression of increased market depth and 

book pressure in order to fraudulently and manipulatively induce other market participants to place 

orders for contracts at price levels that they would not have placed but for the spoof orders. 

Oystacher and 3 Red then misused the avoid orders that cross functionality to vit1ually 

simultaneously cancel their spoof orders and flip to aggressively take the other side of the market 

(and tt·ade with market participants induced to place orders similar to the spoof orders before other 

market pat1icipants became aware that they were spoof orders). Defendants did this during the 

relevant period, including: 

(a) at least 288 times in the COMEX copper market on December 1, 2, 5-9, 12-16, 19, and 


20, 2011. 


(b) at least 324 times in the NYMEX crude oil market on May 7 and 9-11 2012. 

(c) at least 330 times in the NYMEX natural gas market on November 30 and December 3­

4,2012. 


(d) at least 89 times in the CFE VIX market on February 19-22, 25-28, and March 1, 4-7, 


11-12, 18-21, 2013. 


(e) at least 285 times in the CME E-Mini S&P 500 market on June 11 and 12, 2013, as well 


as December 16-19, 2013 and January 6-10, 2014. 


32 I 

I 

I 

I 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 33 of 36 PageiD #:33 

10 I. Oystacher and 3 Red knew or recklessly disregarded that their manipulative and 

deceptive spoofing strategy would create the false appearance of increased market depth and book 

pressure, thus luring market participants to place orders based on Defendants' spoofing. 

Accordingly, Oystacher and 3 Red violated Section 6(c)(l) of the Act, 7 U.S.C.§ 9(1) (2012), and 

Regulation 180.1, 17C.F.R. § 180.1 (2014). 

102. Each time that Oystacher and 3 Red engaged in this conduct constitutes a distinct 

and separate violation of Section 6(c)(I) ofthe Act, 7 U.S.C.§ 9(1) (2012), and Regulation 180.1, 

17 C.F.R. § 180.1 (2014). 

103. Section 2(a)(l)(B) ofthe Act, 7 U.S.C. § 2(a)(1)(B) (2012), provides that the act, 

omission or failure of any official, agent, or other person acting for any corporation within the 

scope of his employment shall be deemed the act of the corporation. Because the actions of the 

officers, employees and agents of 3 Red, including, but not limited to Oystacher, that violated 

Section 4c(a)(5)(C) of the Act, 7 U.S.C. § 6c(a)(5)(C) (2012), were within the scope oftheir 

employment, 3 Red is liable for those acts constituting violations pursuant to Section 2(a)(l)(B) of 

the Act, 7 U.S.C. § 2(a)(1)(B) (2012). 

104. Oystacher controlled 3 Red, directly and indirectly, and did not act in good faith or 

knowingly induced, directly or indirectly, the acts of 3 Red that constitute the violations alleged in 

this Count; therefore, pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c{b), Oystacher is liable as 

a controlling person for the violations by 3 Red of Section 6{c)(l) ofthe Act, 7 U.S. C.§ 9(1) (2012), 

and Regulation 180.1, 17 C.F.R. § 180.1 (2014). 

33 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 34 of 36 PageiD #:34 

VI. RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that this Court, as authorized 

by Section 6c of the Act, 7 U.S.C. § 13a-1 (2012), and pursuant to the Court's own equitable 

powers, enter: 

a) An order finding Oystacher and 3 Red liable for violating Sections 4c(a)(S)(C) and 

6(c)(1) ofthe Act, 7 U.S.C. §§ 6c(a)(S)(C) and 9(1) (2012), and Regulation 180.1, 17 C.F.R. § 

180.1 (2014); 

b) An order of permanent injunction prohibiting Defendants and any of their affiliates, 

agents, servants, employees, successors, assigns, attorneys, and persons in active concert with 

Defendants, from directly or indirectly: 

(i) 	 engaging in conduct in violation of Sections 4c(a)(S)(C) and 6(c)(1) of the Act, 

7 U.S.C. §§ 6c(a)(S)(C) and 9(1) (2012) and Regulation 180.1, 17 C.F.R. § 180.1 

(2014); 

(ii) 	 trading on or subject to the rules ofany registered entity (as that tennis defined in 

Section la ofthe Act, 7 U.S.C. § Ia (2012)); 

(iii) 	 entering into any transactions involving "commodity interests" (as that term is 

defined in Section 1.3(yy) ofthe Act), 7 U.S.C. § 1.3(yy) (2012)), for Defendants' 

own accounts or for any account in which they has a direct or indirect interest; 

(iv) 	 having any commodity interests traded on Defendants' behalf; 

(v) 	 controlling or directing the trading for or on behalf ofany other person or entity, 

whether by power ofattorney or otherwise, in any account involving commodity 

interests; 

34 
Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 35 of 36 PageiD #:35 

(vi) 	 soliciting, receiving, or accepting any funds from any person for the purpose of 

purchasing or selling any commodity interests; 

(vii) 	 applying for registration or claiming exemption from registration with the 

Commission in any capacity, and engaging in any activity requiring such 

registration or exemption from registration with the Commission, except as 

provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2014); 

(viii) 	 acting as a principal (as that term is defined in Regulation 3.1(a), 17 C.F.R. 

§ 3.l(a) (2014)), agent or any other officer or employee of any person registered, 

exempted from registration or required to be registered with the Commission 

except as provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2014); 

c) Enter an order directing Defendants to pay civi I monetary penalties, to be assessed 

by the Court, in an amount not to exceed the higher of $1 ,000,000 or triple the monetary gain to 

them for each violation of Section 6(c)(1) the Act and Regulation 180.1, as well as an amount not to 

exceed the higher of$140,000 or triple the monetary gain to them for each violation of the other 

provisions of the Act and regulations described herein; 

d) Enter an order providing for such other and further remedial and ancillary relief, 

including, but not limited to, disgorgement and trading and registration bans, as this Court may 

deem necessary and appropriate; and; 

e) Enter an order requiring Defendants to pay costs and fees as permitted by 28 U.S.C. 

§§ 1920 and 2412(a)(2) (20 12). 

Dated: October 19, 2015 

35 

Case: 1:15-cv-09196 Document#: 1 Filed: 10/19/15 Page 36 of 36 PageiD #:36 

Respectfully submitted, 

Is/ Elizabeth M. Streit 

Elizabeth M. Streit 

Chief Trial Attorney 

Illinois ARDC No. 06188119 

Jon J. Kramer 

Senior Trial Attorney 

Illinois ARDC No. 06272560 

Allison V. Passman 

Senior Trial Attorney 

Illinois ARDC No. 06287610 

Jennifer E. Smiley 

Senior Trial Attorney 

Illinois ARDC No. 6275940 

Scott R. Williamson 

Deputy Regional Counsel 

Illinois ARDC No. 06191293 

Rosemary Hollinger 

Deputy Director 

Illinois ARDC No. 03123647 

U.S. Commodity Futures Trading Commission 

525 W. Monroe Street, Suite 1100 

Chicago, Illinois 60661 

(312) 596-0537 (Streit) 

(312) 596-0563 (Kramer) 

(312) 596-0704 (Passman) 

(312) 596-0530 (Smiley) 

(312) 596-0560 (Williamson) 

(312) 596..0538 (Hollinger) 

(312) 596-0714 (facsimile) 

estreit@cftc.gov 

jkramer@cftc.gov 

apassman@cftc. gov 

jsmiley@cftc.gov 

swi lliamson@cftc.gov 

t·ho IIin ger@cftc. gov 

36