Well-known high-stakes poker player Dan Shak has reached a settlement with the US's Commodity Futures Trading Commission (CFTC) to resolve a civil case the commission brought against Shak in 2022 alleging that Shak had made "spoofing" trades that falsely influenced gold and silver market prices.
Shak, who maintained his innocence regarding the allegations, was ordered to pay a $750,000 fine. According to a CFTC press statement, the agreement also "permanently prohibits Shak from trading in commodity interests and registering with the CFTC in any capacity, and [includes] a permanent injunction prohibiting Shak from further violations of the CEA’s prohibitions on spoofing and manipulative and deceptive schemes to defraud."
The CFTC defines spoofing as "bidding or offering with the intent to cancel the bid or offer before execution," which in turn leads to deceptive manipulation of the commodity in question, often to place real orders in the opposite direction. Shak has had multiple scrapes with commodity-related regulators, and according to the CFTC, that background led to more severe penalties than might otherwise have been issued.
“Last year, the Division of Enforcement released an advisory that emphasized the Division will ‘heavily factor recidivism’ into its determination of appropriate civil monetary penalties,” said CFTC Director of Enforcement Ian McGinley," regarding the settlement with Shak. Shak's conflicts with regulators date back to at least 2008, when he and his SHK Management LLC business entity were accused of "banging the close," meaning to flood a futures market with end-of-day orders to manipulate later prices.
"By placing the spoof orders, Shak intentionally or recklessly sent false signals of increased supply or demand that were designed to trick market participants into executing against orders on the opposite side of the market, which he actually wanted filled," the CFTC added. "Shak’s spoof orders allowed him to fill orders on the opposite side of the market sooner, at a better price, and/or in larger quantities than he otherwise would."
Previous situations with commodities-trading regulators
Shak paid a $400,000 fine to resolve that matter in 2013 and was ordered to cease trading in oil futures. He had already moved more strongly into precious-metal futures, and in 2011, that led to a situation where he had to bail out of $850 million in gold-futures contracts. The situation sent a "shudder" through the gold market, and Shak blamed his forced selloff on market pressures created by banking investment firm JP Morgan.
Years later, Shak and two other traders sued JP Morgan over similar "spoofing" allegations as those lodged against Shak himself, which resulted in an undisclosed settlement paid by JP Morgan in 2020 to Shak and the other two traders.
Despite that legal win, however, Shak had other troubles with regulators. In 2015 he was accused of violating the terms of his 2013 settlement, and his trading activities from 2015-18 were the basis of the civil complaint that was just settled this week. In his own statement, Shak refused to admit to the allegations, but declared that continued to battle the case would cost more in legal fees than the fine he agreed to pay.
Though the settlement order appears to end any future for Shak in commodities trading, there's always his future in poker, as Shak has been a more frequent face at the tables in recent years. Less than two weeks ago, Shak landed his first PokerGO Tour title in the PGT's recent Mixed Games series.
Shak issues statement regarding settlement
A representative for Shak issued the following statement to PokerOrk about the settlement:
DAN SHAK RESOLVES CFTC MATTER WITH NO ADMISSION OF WRONGDOING
NEW YORK, April 11, 2024 – Daniel L. Shak today issued the following statement regarding his recently finalized settlement agreement with the U.S. Commodity Futures Trading Commission (“CFTC”). The agreement resolves the CFTC’s investigation into trading in the gold and silver futures market with no admission of wrongdoing by Mr. Shak:
"While I am confident I could have prevailed at trial, I have concluded the right decision for my family and me is to resolve this matter with no admission of wrongdoing and without the cost, delay, and distraction of protracted litigation. As part of finalizing the settlement, the CFTC required that I not deny their allegations, but I also do not admit them. I was an active trader making millions of trades per year, and the CFTC’s allegations relate to a small fraction of trades that allegedly occurred from 2015 to 2018. After 45 years as a member in good standing on the exchanges, and having retired nearly two years ago, now is the right time to put this matter behind me, pursue other opportunities, and avoid litigation costs that would far exceed the fine I am paying."
