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Deutsche Bank (DB) Settles Spoofing Case, To Pay $130M Fine

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Legal issues continue to haunt Deutsche Bank AG (DB - Free Report) . Per Bloomberg, the Frankfurt-based bank has agreed to pay a penalty of more than $130 million in a deal signed with the Justice Department. The move will fully settle the probes related to criminal and civil charges against the bank for bribing foreign officials and manipulating the precious-metals futures market through a trading method called spoofing.

Spoofing is a method wherein traders place orders that they intend to cancel in order to move the prices in a particular direction. While submitting and cancelling orders isn’t illegal, it is against the law to trick other traders with such a strategy.

Per terms of the deal, the German bank has been spared from prosecution until it gets involved in such practices again for more than three years. Also, Deutsche Bank was not asked to plead guilty for the charges. The federal prosecutors brought the case in Brooklyn, New York, and Washington.

The total fine to be paid by Deutsche Bank includes a criminal penalty of $80 million for violating the Foreign Corrupt Practices Act and $5.6 million for commodities fraud. However, the bank was provided credit for settling earlier with the Commodity Futures Trading Commission.

Further, Deutsche Bank is liable to pay more than $43 million to the Securities and Exchange Commission (SEC), which would resolve the civil action against the bank related to the bribery conduct. Per SEC’s investigation, along with lacking proper internal accounting controls on third-party intermediaries by the bank, suspicious payments worth $7 million were recorded as valid business costs. Moreover, employees at the bank were also found to have been generating falsified invoices and other documents.

“While we cannot comment on the specifics of the resolutions, we take responsibility for these past actions, which took place between 2008 and 2017,” Deutsche Bank spokesperson Dan Hunter said in a statement. “Our thorough internal investigations, and full cooperation with the DOJ and SEC investigations of these matters, reflect our transparency and determination to put these matters firmly in the past,” Hunter further added.

Per the spokesman, “significant remedial actions,” have been taken by the bank. These actions include investment of more than 1 billion euros ($1.22 billion) in data, technology and controls for improving the training, along with increasing the anti-financial-crime staff to more than 1,600 globally.

For Deutsche Bank, this settlement is an addition to its growing list of litigation charges. Notably, around $18 billion has been paid by the bank as penalties for financial malpractices in the last 10 years since the financial crisis. Dismal earnings, a tough operating backdrop and top-level management changes are some of the other major matters that have been dampening the company’s financials.

Prior to Deutsche Bank, last September,JPMorgan (JPM - Free Report) agreed to pay a penalty of $920 million to fully settle the probes related to “historical trading practices by former employees in the precious metals and U.S. treasuries markets, and related conduct between 2008 and 2016.” The company also admitted to wrongdoing.

The fine paid by JPMorgan is by far the largest ever imposed by the regulators on banks for spoofing, which was banned after the 2008 financial crisis under the Dodd Frank regulation. Over the past few years, other global banks like UBS Group (UBS - Free Report) and HSBC Holdings (HSBC - Free Report) have also been fined over similar allegations.

Further, last august, Bank of Nova Scotia also agreed to pay $127.4 million to resolve U.S. allegations that it engaged in spoofing of gold and silver futures contracts. The bank admitted to the wrongdoings.

Shares of Deutsche Bank have gained 19.8% over the past six months compared with the industry’s rise of 31.7%. Currently, the stock carries a Zacks Rank #3 (Hold).

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