A trader with a global investment firm has been charged by the U.S. Commodity Futures Trading Commission (CFTC) in connection with an alleged scheme to manipulate U.S.-dollar interest rate swaps.
The CFTC filed a civil enforcement action against John Patrick Gorman III, a swaps trader and managing director at a global investment bank, for allegedly manipulating swap spreads in an effort to benefit his employer in a separate transaction with a bond issuer client.
The allegations have not been proven.
According to the regulator’s complaint, which was filed in the U.S. District Court for the Southern District of New York, Gorman “traded to manipulate the price of 10-year swap spreads” during the pricing of a bond transaction, knowing that it “would be more profitable to the bank, at the expense of the issuer, if the screen reflected a lower price for 10-year swap spreads.”
The CFTC also alleged that Gorman “later tried to cover up his misconduct” by deleting messages sought by CFTC investigators.
“Manipulative and deceptive conduct on swap execution facilities and in the swaps markets harms their integrity and market participants, and we will take action to hold those who commit this type of misconduct accountable,” said Vincent McGonagle, acting director of enforcement at the CFTC.
The commission is seeking civil monetary penalties, disgorgement, restitution and trading bans, among other sanctions.