TD Bank to Pay Over $20 Million to Settle U.S. Treasuries ‘Spoofing’ Case

Toronto Dominion Bank (TD Bank) has agreed to pay over $20 million to settle a U.S. investigation into “spoofing” activities in the U.S. Treasuries market. The settlement stems from allegations that a former TD Bank trader, Jeyakumar Nadarajah, engaged in fraudulent trading tactics to manipulate market prices.

The U.S. Department of Justice announced on Monday that TD Bank has entered into a three-year deferred prosecution agreement, effectively ending the criminal and civil probe into the matter.

According to the agreement, Nadarajah placed hundreds of fraudulent “spoof” orders, creating the illusion of substantial supply and demand in the secondary market for U.S. Treasuries. These spoof orders, amounting to tens of billions of dollars, were intended to deceive other market participants and manipulate prices for Nadarajah’s benefit.

TD Bank has agreed to pay a combined $23.2 million in penalties, victim compensation, and forfeiture. This includes a $12.5 million criminal penalty to resolve civil investigations by the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), as well as an additional $9.5 million criminal penalty related to the deferred prosecution agreement.

The settlement comes at a sensitive time for TD Bank, as it faces separate legal challenges. The Wall Street Journal recently reported that the bank is nearing a guilty plea to criminal charges related to alleged failures by its U.S. retail bank to prevent money laundering tied to Chinese crime groups and illicit fentanyl sales.

Key Takeaways:

• TD Bank has agreed to pay over $20 million to settle a U.S. investigation into “spoofing” in the U.S. Treasuries market.
• The settlement stems from allegations that a former trader placed fraudulent orders to manipulate market prices.
• The bank has entered into a three-year deferred prosecution agreement with the U.S. Department of Justice.
• This settlement comes as TD Bank faces separate legal challenges related to alleged money laundering failures.

The spoofing settlement highlights the risks associated with fraudulent trading practices and the importance of robust compliance and risk management systems within financial institutions. As regulatory scrutiny of financial markets intensifies, banks must prioritize ethical conduct and implement effective controls to prevent manipulative trading activities that undermine market integrity.