He bought high and sold low (to himself). The Polish Financial Supervision Authority reveals the behind-the-scenes of the manipulation

The Polish Financial Supervision Authority has submitted a notification to law enforcement authorities on suspicion of committing a crime of manipulation in trading in financial instruments (futures and options), the value of which depends on the value of the WIG20 stock exchange index, committed in conjunction with the crime of fraud, the Commission said in a press release.

According to the Commission, the manipulation was committed by a natural person – in the period from September 2, 2022 to February 8, 2024 – who received authorized access (power of attorney) to the securities accounts of the principal and commercial law companies belonging to him. This person's goal was to transfer funds from accounts belonging to his principal.

“The manipulation consisted of concluding transactions and placing orders that gave or could give false or misleading signals as to the supply or demand for a financial instrument, or as to their price. The manipulation was based on the execution of matched transactions as a result of placing, at a similar time, opposite buy and sell orders with a very similar volume and a similar price (improper matched orders). The essence of the manipulation was the purchase by a natural person on his own account of financial instruments at a low price, and then selling them at a higher price to the principal's accounts – or, conversely, selling them first at a higher price and then repurchasing them at a lower price,” it was written.

The announcement shows that this person had his own accounts and, based on the power of attorney, the principal's accounts and made a profit on his accounts, generating a loss on the principal's accounts. These activities focused on illiquid series of futures contracts and options, the value of which depends on the value of the WIG20 index. The transactions often amounted to 100 percent. or almost 100 percent the trading volume on a given financial instrument on a given day.

In the Commission's opinion, the described action could mislead capital market participants as to the actual price level and the volume of trading in financial instruments, as well as give false signals as to the supply and demand for a financial instrument.

“Placing orders on both sides of the market with parameters enabling their mutual execution had a significant impact on the price of illiquid futures contracts and options. This resulted in their prices being detached from their actual value and enabled the withdrawal of funds by the proxy from the principal's securities accounts,” it added.

The Commission reported that due to the potential intention of the attorney-in-fact to take over the principal's financial resources – from the beginning of his cooperation with the principal – in addition to the crime of manipulation, the crime of fraud could also have been committed. (PAP Business)

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