North American Derivatives Exchange, Inc. (Nadex), which will soon have a new owner, has banned Liang Zheng for engaging in manipulative scheme to defraud Nadex Markets.
On August 7, 2019, the Compliance Department sent Liang Zheng an Account Inquiry Letter requesting, among other things, general background information, source of funds information and details regarding her order and trading activity.
The Compliance Department acknowledges that Zheng responded to certain inquiries and requests for information. However, after several follow up inquiries Zheng did not adequately respond to requests for her banking and trading activity, among other things.
The Compliance Department also found that Zheng allowed another Nadex Member to fund her Nadex account by transferring funds into her bank account which were subsequently transferred to Nadex, thus providing the other Member with a direct economic interest in the activity and trading in her Nadex account. Additionally, during the course of this investigation it became evident that Zheng funded another Nadex Member’s trading account via bank transfers, thus resulting in her having a direct economic interest in the activity and trading in the other Member’s account.
Further, Zheng provided misleading information to the Compliance Department relative to her connections with other Nadex Members and source of funding.
During the course of its investigation, the Compliance Department analyzed the order and trading activity throughout the life of Zheng’s Nadex account. Through this review, the Compliance Department discovered that Zheng engaged in or attempted to engage in a manipulative scheme to defraud Nadex markets in at least 12 binary option contracts between August 5, 2019 and August 21, 2019.
Accordingly, the Compliance Department concluded that Zheng violated Exchange Rule 5.19(k) when she provided false and/or incomplete information related to her connections with other Nadex Members and source of funding. Additionally, the Compliance Department has concluded that Zheng violated Member Acknowledgements and Authorizations, Section (h) of the Nadex Membership Agreement and Exchange Rule 3.3(a) by failing to fully cooperate with this investigation.
Additionally, Zheng violated the Nadex Membership Agreement, Member Representations Section (d), when she allowed another Nadex Member to have a direct economic interest in the activity and trading in her Nadex account. Furthermore, Nadex Compliance concluded that Zheng violated Nadex Rule 3.1(f) when she utilized another Nadex Member’s account as a second account on Nadex traded for her benefit.
Finally, Zheng’s manipulative activity was to the detriment of other market participants. Engaging or attempting to engage in conduct and practices that are manipulative and inconsistent with just and equitable principles of trade, and that pose a risk to the Exchange, its members, and/or to the public, is in contravention of Nadex Rules 5.19(h), 5.19(i), 5.19(n) and 5.19(t). Accordingly, the Compliance Department has concluded that Zheng violated Nadex Rules 5.19(h), 5.19(i), 5.19(n) and 5.19(t).
By settlement agreement, in which Liang Zheng neither admitted nor denied the findings or conclusions of the investigation, Zheng has been assessed a $2,500 fine. Additionally, Liang Zheng’s Nadex Membership has been revoked, her account terminated, and she has been permanently banned from trading on Nadex markets, either directly for her own account, through an intermediary, or as an authorized trader on behalf of any other account.
The disciplinary notice is effective from February 22, 2022.