Toronto-Dominion Bank (TD Bank) has agreed to pay over $20 million USD to resolve a US investigation into fraudulent trading activities by a former employee, according to a filing from the US Department of Justice.
The Canadian bank, one of the largest in the country, has entered a three-year deferred prosecution agreement to settle both criminal and civil probes linked to “spoofing” in the US Treasuries market.
The case involves former TD Securities trader Jeyakumar Nadarajah, who allegedly engaged in “spoofing” by placing hundreds of fraudulent orders worth billions of dollars between April 2018 and May 2019. These false orders manipulated the market by artificially inflating the supply and demand for US Treasury securities, allowing the trader to secure more favorable prices on legitimate trades.
As part of the settlement, TD Bank will pay a $12.5 million USD criminal penalty to resolve civil investigations by the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). In addition, the bank will pay $9.5 million USD in penalties related to the criminal investigation, $4.7 million USD in victim compensation, and $1.4 million USD in forfeiture.
TD Securities has also agreed to pay $6.5 million USD in connection with the spoofing charges brought by the SEC, which also accused the bank of failing to supervise Nadarajah, who allegedly executed hundreds of illegal trades over a 13-month period. The SEC’s order further indicated that TD Securities did not take sufficient action despite warnings of suspicious trading activities by Nadarajah.
In response to the charges, TD Securities emphasized its commitment to regulatory compliance and noted that it had reported Nadarajah’s activities to FINRA five years ago, leading to his termination. The bank has since strengthened its compliance and monitoring systems to prevent similar misconduct in the future.
“Spoofing” refers to the practice of placing orders in financial markets without intending to execute them, creating false impressions of market activity to manipulate asset prices. The SEC underscored that such manipulative trading tactics undermine market integrity, with Associate Director Mark Cave stating that firms must actively detect and prevent such behavior by their employees.
This settlement comes at a time when TD Bank is also reportedly close to facing criminal charges related to separate issues involving its US retail banking arm, which is accused of failing to prevent money laundering connected to Chinese crime syndicates and illegal fentanyl sales.
Market Watch, CBC News, and US Securities and Exchange Comission contributed to this report.
