SEC v. Ryan N. Cole — U.S. Securities and Exchange Commission Litigation Release No. 26371, dated August 11, 2025.
The SEC charged Ryan N. Cole, a California trader, for a manipulative options spoofing scheme. Cole allegedly placed fake orders to influence option prices and then executed real trades at those manipulated prices, profiting approximately $234,000. He also attempted to conceal his actions from his employer, which ultimately led to his termination.
In Plain English
Imagine someone wants to sell a rare collectible. They might pretend to be interested in buying it for a much higher price than it's worth, just to get other people excited about it. Once others start thinking it's worth more, the seller then quickly sells their own collectible at that inflated price. Ryan Cole did something similar with stock options, placing fake orders to make prices look different, then quickly trading at those fake prices to make money.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Targeting Thinly Traded Options Ryan N. Cole, working as a trader for a financial firm, identified options contracts that were not frequently traded and had a wide gap between the highest price a buyer was willing to pay (bid) and the lowest price a seller was willing to accept (offer). These conditions made the options more susceptible to price manipulation.
- Placing Fake 'Spoof' Orders Cole would place large, non-bona fide orders – known as 'spoof' orders – on one side of the market. These orders were visible to other traders but were not intended to be executed. They were priced significantly away from the current market price, either much lower than the best offer or much higher than the best bid.
- Manipulating Neighboring Options Series To amplify the effect, Cole sometimes placed these spoof orders across multiple, neighboring options series that referenced the same underlying security. This strategy aimed to influence the price discovery and liquidity across a cluster of related options.
- Narrowing the Bid-Ask Spread By placing these spoof orders, Cole's actions artificially narrowed the spread between the best bid and best offer for these thinly traded options. This manipulation was designed to attract the attention of other market participants to these otherwise overlooked securities.
- Executing Real Trades at Manipulated Prices Once the market price was influenced by his spoof orders, Cole would then execute real, immediate-or-cancel orders on the opposite side of the market within the newly established price range. He used complex, multi-leg orders to coordinate these executions across different options series.
- Cancelling Spoof Orders After his intended trades were executed, Cole would quickly cancel his original spoof orders. This action removed the artificial price influence, allowing the bid-ask spread to return to its true market levels, leaving him with a profitable position.
- Repeating for Profit Cole would repeat this process, sometimes on the opposite side of the market, to further manipulate prices and lock in his ill-gotten gains. Through this scheme, he obtained approximately $234,000.
- Concealing Activities from Employer To hide his fraudulent trading, Cole provided false and misleading responses when his firm's senior management, including the Chief Compliance Officer, questioned his trading activity. He was terminated by the firm after his responses were deemed unsatisfactory.
The Enforcement Action
The SEC filed settled charges against Ryan N. Cole for engaging in a manipulative options spoofing scheme. Cole allegedly placed fake orders to manipulate prices of thinly traded options and then executed real trades at those manipulated prices, obtaining approximately $234,000 in ill-gotten gains. He also attempted to conceal his actions from his employer, leading to his termination. Cole, without admitting or denying the allegations, consented to a permanent injunction, disgorgement of $234,803 plus $52,656 in prejudgment interest, and a civil penalty of $70,441. He is also prohibited from trading in brokerage accounts for five years under certain conditions.
Named in this action: Ryan N. Cole.