According to FINRA, Sidney Lebental was named as a respondent in a FINRA complaint alleging he engaged in 523 instances of "spoofing," a type of fraudulent trading involving the use of non-bona fide orders to induce executions of bona fide orders entered on the opposite side of the market.

The complaint alleges Lebental engaged in spoofing while trading as a market maker in U.S. Treasury Bonds and supervising the U.S. Treasury desk of his FINRA member firm. In each instance, Lebental allegedly entered a large, fully displayed non-bona fide order to purchase or sell the 30-year U.S. Treasury Bond while already having a bona fide order on the opposite side of the market in either the 30-year Bond or the correlated Ultra Treasury Bond future.

The non-bona fide orders allegedly created a false appearance of market depth and activity so that Lebental's bona fide orders would receive favorable executions at better prices. Market participants on the other side of the spread from his bona fide order allegedly responded by crossing the spread and executing at his price, sometimes resulting in even better prices for Lebental. After receiving executions of his bona fide orders, Lebental allegedly cancelled the non-bona fide orders within three seconds of entry in all 523 instances, and within one second in 370 instances.

The complaint alleges Lebental acted with scienter (intent to deceive) in each instance by entering orders with the intent to cancel them before execution to intentionally or recklessly create an artificial imbalance and induce executions of his opposite-side bona fide orders. The complaint also alleges violations of quotation rules, anti-fraud provisions, and ethical standards.

Because this is a complaint and findings have not been made, the allegations remain unproven. Spoofing undermines market integrity by creating false impressions of supply and demand. If proven, such conduct in U.S. Treasury markets is particularly serious given the critical importance of these markets to the global financial system.