Three Hungarian traders and two investment firms have been ordered to pay £7.5m after manipulating the share prices of 186 companies in London. The high court made the ruling in a case brought by the Financial Conduct Authority, which had obtained a temporary injuction in 2011 to stop them embarking on a process known as layering, or spoofing. Under this process, lots of orders are entered into a trading system to move share prices, with the aim of allowing the traders to profit from the change in price.
It is the first time that the FCA has asked the high court to impose a penalty and a permanent injunction to restrict market abuse.
The three traders are Szabolcs Banya, Gyorgy Szabolcs Brad and Tamas Pornye. The two firms are Switzerland-based Da Vinci Invest and Mineworld Limited, based in the Seychelles, which the three traders are said to have set up. Da Vinci Invest intends to appeal against the judgment, its founder Hendrik Klein said. According to Bloomberg, the judge said that while the managers of Da Vinci Invest did not know about the market abuse, they should have monitored it more closely.
Georgina Philippou, the FCA’s acting director of enforcement and market oversight, said the defendants had engaged in a sophisticated form of market abuse. “This case demonstrates that we are prepared to take robust action to ensure the integrity of UK markets. We acted quickly to stop the abusive behaviour in 2011 and today’s judgment means that those behind the abuse will now have to pay significant financial penalties,” said Philippou.
The FCA’s case was that the traders were putting orders into the market to create a false impression of supply or demand, but which they never intended to trade. They were able to move share prices up or down and then placed trades at a price from which they were able to make a profit. They were able to buy shares at lower prices or sell them at higher prices than they would otherwise have been able to, the FCA said.
The judge, Mr Justice Snowden, adjourned the court until after 7 September to set dates for the sums to be paid: £1.5m by Da Vinci Invest, £5m by Mineworld Ltd, £410,000 by Banya, £290,000 by Brad and £410,000 by Pornye.
The judge said: “Market abuse can cause serious harm, not only to other market participants and the millions of private citizens whose personal wealth and provision for retirement is invested on the financial markets, but also to the reputation of those markets. Protecting the integrity and proper functioning of those markets is a matter of substantial importance to individuals, as well as to national and international economic interests. The policy imperative to prevent and deter market abuse is very clear.”
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