On December 19, 2019, the Office of the Comptroller of the Currency (OCC) appealed a decision from the U.S. District Court for the Southern District of New York holding that the OCC cannot offer special purpose national bank charters to fintech companies. Lacewell v. Office of the Comptroller of the Currency, Case 1:18-cv-08377 (S.D.N.Y. Sept. 14, 2018).
Continue Reading OCC Appeals Fintech Charter Ruling to Second Circuit

The U.S. Government’s fiscal year-end filing rush has resulted in a wave of new spoofing enforcement.  In August, the Fraud Section of the Department of Justice’s (“DOJ”) Criminal Division charged four individuals with spoofing in precious metals futures markets.  In September, the Commodity Futures Trading Commission (“CFTC”) brought overlapping charges against three of those individuals, and separately charged two trading firms and their employees.  Finally, in an independent development, the United Kingdom’s Office of Gas and Electricity Markets (“Ofgem”) announced its first-ever spoofing charges against an energy trading firm in September.

The new cases show that the DOJ’s Criminal Fraud Section and the CFTC are continuing to coordinate their enforcement activities.  On the same day, September 16, 2019, the DOJ unsealed the August indictment and the CFTC announced civil charges for the same conduct.  The agencies first unveiled their heightened coordination in this area in January 2018, when they initiated parallel spoofing takedowns that have since resulted in several guilty pleas, settlements, an acquittal (Flotron), and a hung jury (Thakkar).

In their recent filings, the agencies reveal new charging strategies.  The DOJ’s unsealed indictment includes the first-ever RICO charge for spoofing.  Both agencies are also charging attempted manipulation under the Commodity Exchange Act (“CEA”) in certain cases.  While attempted manipulation previously has been applied to spoofing, the DOJ and CFTC omitted the charge in their parallel actions in January 2018.

The new strategies may be belated responses to the DOJ’s April 2018 trial defeat in Flotron, in which the jury acquitted a trader of a single count of conspiracy to commit spoofing.  A broader menu of charges allows the DOJ to introduce a wider array of evidence at trial, and gives the jury more options to convict.

Spoofing enforcement has taken a new turn overseas as well.  On September 5, Ofgem announced its finding that Engie Global Markets (“EGM”) engaged in spoofing to manipulate wholesale gas prices between June and August 2016.  Ofgem’s press release defined spoofing as “manipulating prices by placing bids or offers to trade with no intention of executing those bids or offers in order to buy or sell at a higher or lower price and increase trading profits.”

Ofgem found that EGM’s spoofing conduct violated Article 5 (prohibition on market manipulation) of Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency.  This appears to be the first time that Ofgem has issued a fine for spoofing.

As the DOJ and CFTC continue to dedicate significant resources to spoofing enforcement, and overseas regulators, such as Ofgem, increasingly enter the mix, it is safe to assume that spoofing will continue to be a key risk area for commodities and derivatives traders and the firms and institutions that employ them.

Continue Reading Spoofing Enforcement Heats Up with Recent Filing Wave and New Legal Charges

On September 17, Consumer Financial Protection Bureau (“CFPB”) Director Kathleen Kraninger sent letters to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell stating that the CFPB “has determined that the for-cause removal provision of the Consumer Financial Protection Act . . . is unconstitutional.”  The Bureau now affirms that the for-cause removal provision

On August 14, 2019, the U.S. District Court for the Northern District of Illinois entered a consent order (the “Consent Order”)—agreed to by the U.S. Commodity Futures Trading Commission (the “CFTC”), Kraft Foods Group Inc. (“Kraft”) and Mondelēz Global LLC (“Mondelēz”)—to resolve long-running market manipulation litigation between the parties.

Continue Reading CFTC Settles Wheat Manipulation Case against Kraft and Mondelēz

England’s Court of Appeal has decided that the Competition Appeals Tribunal (the “CAT”) erred in rejecting certification of former financial ombudsman Walter Merricks’ class action against MasterCard, for £14 billion.  As a result, the CAT will now reconsider whether to certify the class.  The decision has lowered the bar that will need to be cleared in this and future class actions in order to achieve certification.  In this alert, we consider the decision and its implications for the UK’s fledgling class action regime.

Continue Reading English Competition Appeals Tribunal to Reconsider £14 Billion Class Action Against MasterCard

On January 9, 2019, a divided three-judge panel of the Ninth Circuit held that the Federal National Mortgage Association, or Fannie Mae, is not a “consumer reporting agency” within the meaning of the Fair Credit Reporting Act (the “FCRA”). The case, Zabriskie v. Federal National Mortgage Association, was brought by prospective borrowers who were unable to refinance their current mortgage loans due to allegedly erroneous information in their credit histories, as reported by Fannie Mae software that is commonly used by mortgage lenders.

Continue Reading Fannie Mae is Not a Consumer Reporting Agency Under the FCRA, Ninth Circuit Says

On October 25, 2018, the Conference of State Bank Supervisors (“CSBS”) filed a complaint in the United States District Court for the District of Columbia to stop the Office of the Comptroller of the Currency (“OCC”) from issuing special purpose national bank charters to fintech companies.  The lawsuit follows a similar suit against the OCC by the New York State Department of Financial Services (“DFS”) in the United States District Court for the Southern District of New York, which we discussed in September.

Continue Reading State Regulators Renew OCC Suit Over Fintech Charter

On October 9, 2018, Grovetta Gardineer, the Office of the Comptroller of the Currency’s (“OCC’s”) senior deputy comptroller for compliance and community affairs, reaffirmed the OCC’s willingness to accept applications from fintech companies seeking a special purpose national bank charter and grant such applications if the application meets certain requirements.

These remarks, which were made

On September 14, 2018, Superintendent of the New York State Department of Financial Services (“NYSDFS”) Maria T. Vullo filed a complaint in federal court against the U.S. Office of the Comptroller of the Currency (“OCC”) to block the OCC from issuing any special purpose national bank (“SPNB”) charters. The OCC announced last month, after much