Dan Shak charged by CFTC with 'spoofing' - falsely manipulating gold and silver futures markets

Dan Shak Event 05 (Image: Haley Hintze)
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Haley Hintze
Posted on: August 05, 2022 11:32 PDT

Well-known high-rolling poker player Dan Shak has been targeted by the United States' Commodity Futures Trading Commission (CFTC) in a civil enforcement action alleging "spoofing" activities in the gold and silver futures markets. Spoofing refers to the practice of "bidding or offering with the intent to cancel the bid or offer before execution", meaning to place fake purchase offers with the intent of manipulating the market price of the commodity in question.

According to a press release issued today by the CFTC, Shak placed deceptive and manipulative orders on hundreds of different occasions between February 2015 and March 2018. By placing and then canceling the orders, according to the CFTC's allegations, Shak hoped to drive up the price of the gold or silver while then selling his own holdings in the precious metals.

The CFTC, which runs its own Spoofing Task Force and searches for such manipulation within commodities trading, also asserted, "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. 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 they otherwise would have been filled."

Though the action is civil, not criminal, meaning Shak is not currently in danger of jail time, the CFTC's action could result in significant financial levies and trading penalties against Shak. The CFTC has stated that it seeks civil monetary penalties, disgorgement, trading bans, and a permanent injunction against future violations of the federal commodities laws, as charged. The case was filed in the U.S. District Court for the District of Nevada. Shak, originally from New York, currently lives in Las Vegas.

Civil action is latest episode in Shak's headline-making trading career

It's far from the first time Shak has been involved in controversial and headline-generating activities in his lengthy market-trading career, which in turn has afforded him the lifestyle choice of participating in high-stakes poker events for two decades.

Shak first faced commodity-related charges connected to illicit activity during a couple of trading days back in 2008, when he used a scheme called "banging the close." In that episode, his firm, SHK Management LLC, flooded the oil-futures market with end-of-day orders in an attempt to manipulate that market. The CFTC sued Shak and his company, and Shak eventually agreed to pay a $400,000 settlement, while also being banned from trading in oil and certain other commodity-related "naked futures."

Before that case's 2015 resolution, however, Shak's trading in gold generated perhaps the largest mainstream headlines of his trading career. Shak's hedge fund, though it only held about $10 million in firm assets in 2011, possessed highly-leveraged gold futures worth up to $850 million. When Shak decided to sell out of the gold market, in response to conflicting market pressures he claimed were led by JP Morgan, the action sent a shudder through the gold market.

Shak and two separate metals traders eventually filed suit against JP Morgan, in part alleging the same sort of spoofing activities that Shak himself was sued for today. JP Morgan quietly settled with Shak and the other two traders in 2020 for an undisclosed amount, while also paying a massive settlement to the CFTC for widespread illicit trading activities, though the firm publicly claimed innocence regarding the spoofing allegations.

Shak ranks in top 100 in poker's global tourney winnings

Being best described as a part-time or semi-pro poker player, Shak epitomizes the "wealthy businessman who likes to play tournament poker" image. His major recorded tournament cashes date back to 2004, and with over $11.7 million in live tournament winnings, Shak ranks 83rd on the Hendon Mob's career global tournament-poker winnings list.

Shak has a handful of major victories to his credit including the 2010 Aussie Millions $100,000 Challenge, where he outdueled Phil Ivey to win the event's AU $1.2 million (about US $1.1 million) first-place payday. That's the single largest tourney score of Shak's career.

Shak also has two notable WSOP victories, though neither came in an official bracelet event. In 2007, Shak and Brandon shared winner's honors in the inaugural $5,000 "Ante Up for Africa" charity event, and Shak donated his portion of the winnings to charity. And at the 2017 WSOP Europe series in Rozvadov, Czech Republic, Shak won the $25,000 NLH Super High Roller tourney, topping 20 other players to win €210,112 (about $244,000). However, the event did not award a WSOP gold bracelet at the time.

Featured image source: Haley Hintze