A retailtrader from United States agreed to pay more than $357,000 to settle chargesthat he manipulated options prices through a scheme involving fake orders,federal regulators announced this week.California Trader Pays$357K to Settle Options Spoofing CaseRyan Cole,who lives in Florida, used a technique called "spoofing" toartificially move prices on thinly traded options while working at an unnamedfinancial firm, the Securities and Exchange Commission (SEC) said. The practicenetted him roughly $234,000 in profits before he was caught and fired.The schemeworked by placing fake orders that he never intended to execute, creating theappearance of demand or supply that would push prices in his favor. Cole wouldthen quickly place real trades at the manipulated prices before canceling thefake orders, according to the SEC complaint filed in federal court inCalifornia's Eastern District.Cole madehis spoofing more sophisticated by spreading fake orders across multiplerelated options series rather than focusing on just one contract. He usedcomplex multi-leg orders that would execute immediately or be canceled, timingthem carefully with his spoof orders to maximize the manipulation's impact.In 2020,another trader was ordered by the SEC to pay more than $200,000 in penaltiesfor spoofing.Five-Year Trading BanWhen hisemployer started asking questions about unusual trading patterns, Coleallegedly lied to cover his tracks. The firm eventually terminated him, thoughthe SEC didn't identify which company employed him during the scheme."Coletook steps to conceal his spoofing scheme from the firm by providing false andmisleading responses to questions posed about his trading," the SEC saidin its complaint.Thesettlement requires Cole to pay back his $234,803 in profits plus $52,656 ininterest, along with a $70,441 civil penalty. He also faces a five-year tradingban that prevents him from opening or maintaining brokerage accounts in hisname, his family members' names, or through companies he controls withoutnotifying brokers about his violations.Cole agreedto the settlement without admitting or denying wrongdoing, which is standardpractice in SEC enforcement cases. The deal still requires approval from afederal judge.Spoofing Fines Also HitMajor PlayersSpoofingbecame illegal under the 2010 Dodd-Frank Act, though regulators have struggledto catch sophisticated practitioners who can carry out the scheme inmilliseconds using algorithmic trading. The practice undermines marketintegrity by creating a false impression of supply and demand.The SECpenalizes not only individuals but also large institutions for spoofing. Lastyear, TD Securities was fined $6.5 million for failing to supervise its headtrader. In 2023, BofA Securities paid $24 million for more than 700 instancesof the illegal practice. The largestspoofing fine to date was issued in 2019 to Tower Research, which was orderedto pay $67 million. According to the CFTC, another U.S. regulator, the firm hadearned nearly $33 million from the practice.This article was written by Damian Chmiel at www.financemagnates.com.