A trader accused of wash trading to exploit the liquidity rebates offered by securities exchanges has been ordered to pay US$1.3 million in disgorgement and civil penalties by a U.S. court.
In 2021, the U.S. Securities and Exchange Commission (SEC) charged Suyun Gu, alleging that he engaged in a wash trading scheme between brokerage accounts that paid rebates for placing options orders on one side of the market, and accounts that didn’t charge fees for taking liquidity on the other. The scheme, the SEC said, generated illegal profits by collecting the rebates on illusory trading activity.
The activity was carried out in early 2021 amid the “meme stock” frenzy, targeting options on meme stocks, which were particularly volatile. According to the SEC, these options were targeted on the basis that the underlying volatility would make the options unattractive to other traders, making it easier to engage in wash trading.
In September 2024, the U.S. district court for the District of New Jersey granted the SEC summary judgment on all of its claims against Gu — finding that he executed more than 11,000 wash trades in three million options contracts in order to generate rebates, in violation of securities rules.
It also found that he went to great lengths to conceal the trading, including the use of virtual private servers to hide the fact that he was trading others’ accounts, and provided false information to brokerage firms that questioned his trading.
Now, that same court has entered a final judgment against Gu, ordering him to pay US$1.3 million — including US$621,000 in disgorgement, a US$621,000 civil penalty and prejudgment interest.