SEC v. Ryan N. Cole, Eastern District of California (Aug. 11, 2025) — Complaint

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT
ZACHARY A. AVALLONE (CA Bar No. 295545)
     Telephone: (202) 551-4479
     Email: [email protected]
ANDREW MCFALL
     Telephone: (202) 551-5538
     Email: [email protected]
SETH NADLER
     Telephone: (202) 551-7391
     Email: [email protected]
Securities and Exchange Commission
Division of Enforcement
100 F Street NE
Washington, DC 20549
Counsel for Plaintiff
Securities and Exchange Commission
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
RYAN N. COLE,
De
fendant.
Case No. 25-cv-1038
COMPLAINT JURY
DEMAND

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT

Plaintiff Securities and Exchange Commission (the “SEC”) files this
Complaint against Defendant Ryan N. Cole (“Cole”) and alleges as follows:
SUMMARY OF THE ACTION
1. While working as a trader for a financial firm (the “Firm”), Defendant
Cole perpetrated a manipulative trading scheme known as spoofing. Cole placed
fake—or spoof—orders to manipulate the prices of thinly traded options, and then
he executed   different orders at the resulting manipulated prices. By repeatedly
engaging in this fraudulent conduct, Cole obtained approximately $234,000 in ill-
gotten gains from this scheme.
2. Cole’s spoofing scheme worked like this: he first placed orders for
options that were thinly traded and had a large spread between the National Best
Bid and the National Best Offer. Cole’s spoof orders were visible to the market,
were priced either significantly lower than the current best offer or significantly
higher than the current best bid. He sometimes placed spoof orders across
neighboring options series referencing the same underlying security. By narrowing
the spread between the National Best Bid and Offer across options series, Cole
attracted the attention of other market participants to these thinly traded options.
Cole’s spoof orders, however, were non-bona fide orders that he did not intend to
execute—instead, they were designed to induce other market participants to trade
these securities at manipulated prices, and Cole cancelled most of his spoof orders
relatively quickly.
3. After these spoof orders shifted the market by narrowing the National
Best Bid and Offer spread across neighboring option series, Cole placed coordinated
immediate-or-cancel orders on the opposite side of the market within the newly
established price range across options series, usually on a different exchange, some
of which, due to the market attention drawn by his spoof orders, were executed. To
facilitate desired executions across the neighboring options series in which he had
placed spoof orders, Cole used the complex order book to place multi-leg immediate-

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT

or-cancel orders. After his immediate-or-cancel orders were executed, Cole then
cancelled his spoof orders, which had the effect of returning the National Best Bid
and Offer spread to true market levels.
4. To close out his position, Cole then repeated these same steps on the
opposite side of the market—first using a publicly viewable spoof order to set a new
National Best Bid or National Best Offer and then submitting immediate-or-cancel
orders to lock in his ill-gotten gains.
5. Through this scheme, Cole used spoof option orders—option orders
that he never had any intention of executing—to artificially deflate or inflate the
price of thinly traded options. He then profited by buying and selling those same
options at artificial prices. This practice has long been recognized as an illegal,
fraudulent scheme and a form of market manipulation.
6. Cole knew or was reckless in not knowing that this type of trading was
illegal. As part of his job as a trader, he attended annual compliance trainings led
by the Firm’s Chief Compliance Officer, including training on improper strategies
such as spoofing.
7. Cole also took steps to conceal his spoofing from the Firm. When Firm
senior management, including the Chief Compliance Officer, asked Cole about his
daily trading activity, Cole provided false and misleading responses.
8. In early February 2022, the Firm’s Chief Compliance Officer asked
Cole a series of questions about his trading that appeared to reflect spoofing activity
and requested that Cole provide responses “with very specific detail.” Cole’s
answers were short, non-responsive, and failed to address the indicia of   spoofing
that the Chief Compliance Officer raised.
9. Dissatisfied with Cole’s responses, the Firm terminated Cole’s
employment.
10. By perpetrating the spoofing scheme and as alleged further in this
Complaint, Cole violated, and unless enjoined will continue to violate, Sections

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17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C.
§§ 77q(a)(1) and (3)], and Sections 9(a)(2) and 10(b) of the Securities Exchange Act
of 1934 (“Exchange Act”) [15 U.S.C. §§ 78i(a)(2) and 78j(b)], and Rules 10b-5(a) and
(c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)].
JURISDICTION AND VENUE
11. The SEC brings this action, and this Court has subject matter
jurisdiction over this action, pursuant to Sections 20(b), 20(d), and 22(a) of the
Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)], and Sections 21(d), 21(e), and
27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. Cole, directly or
indirectly, made use of the mails, or the means and instrumentalities of interstate
commerce, or the facilities of national securities exchanges, in connection with the
transactions, acts, practices, and courses of business alleged in this complaint.
12. Venue is proper under Section 22(a) of the Securities Act [15 U.S.C.
§   77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa] because the
Defendant can be found within the Eastern District of California. He currently
splits his time between Nevada and a residence in Folsom, California.
DEFENDANT
13. Ryan N. Cole, age 39, is a former day trader and has never held any
securities licenses. Cole worked at the Firm from May 2018 through February 2022.
TERMS USED IN THIS COMPLAINT
14. Options are a contract that gives the owner the right, but not the
obligation, to buy or sell a specific quantity of an asset at a specific price (“strike
price”) on or before a specific date (“expiration”). Options for securities are
frequently sold as one contract representing 100 shares of a stock.
15. Option series refers to the same type of options (e.g., a put or a call) for
an underlying security with the same strike price and expiration.
16. Spoofing refers to a type of market manipulation scheme where a
trader enters non-bona fide orders to create a false appearance of new or increased

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT

trading interest in a security. Spoofers induce others to place orders priced at or
better than the spoofer’s non-bona fide orders. Spoofing creates artificial market
conditions that benefit the spoofer’s interests while harming other market
participants.
17. National Best Bid is    the highest reported price a buyer is willing to pay
to buy a security.
18. National Best Offer is the lowest reported price that a seller is willing
to accept to sell a security.
19. NBBO. The spread between the National Best Bid and National Best
Offer is referred to as the “NBBO.” The NBBO is publicly reported to the market
and represents the tightest bid-ask spread for a particular security.
20. Thinly traded securities are securities that have low trading volume.
As compared to more actively traded securities with greater trading volume, thinly
traded securities often have fewer interested buyers and sellers and larger NBBO
spreads. Thus, a small number of orders or trades can substantially impact the
market prices of thinly traded securities, rendering them more susceptible to
manipulation than securities that are more actively traded.
21. Limit orders can only be executed if the market price reaches the limit
price. A buy limit order can only be executed at the limit price or lower, and a sell
limit order can only be executed at the limit price or higher. While limit orders do
not guarantee execution, they help ensure that an investor does not pay more than
a pre-determined price.
22. Day-limit orders are limit orders to buy or sell a security at a specific
price or better and which are automatically canceled if they remain unexecuted by
the end of the trading day. While day-limit orders are open, they are publicly visible
and can affect the NBBO.
23. Immediate-or-cancel orders are a type of limit order that must be
executed immediately upon their placement. Any portion of an immediate-or-cancel

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order that cannot be filled immediately will be cancelled. Given the nature of an
immediate-or-cancel order, it does not affect the NBBO and is not publicly visible
unless and until it is executed.
24. Multi-leg orders are a type of complex order for two or more different
options series (“legs”).
25. Complex Order Book enables market participants to place multi-leg
options orders.
FACTS
I. The Firm Hired Cole and Warned Him Not to Spoof.
26. In May 2018, the Firm hired Cole to trade an account funded by the
Firm. Cole was paid an annual salary and was eligible for a performance-based
bonus.
27. Starting in January 2019, and annually thereafter, Cole received
training from the Firm’s Chief Compliance Officer on disruptive trading practices
and improper order behavior. The Chief Compliance Officer explained that Cole and
other employees were prohibited from spoofing, which the training materials
described as entering orders without any intention of executing those orders for the
purpose of driving the market price of a security up or down.
28. The Firm also explained to Cole that it monitored its traders’ activity
for manipulative order behavior by reviewing, among other things, a trader’s
cancellation ratio, pattern and practice of order placement, and a trader’s overall
volume as a percentage of the market.
29. The Firm told Cole that engaging in improper order behavior could
result in termination of his employment, legal action, and an industry bar.
II. Cole Engaged in Manipulative Trading.
30. Despite the Firm’s training, Cole engaged in spoofing on an almost
daily basis from September 2020 through February 2022. Using accounts and assets
belonging to the Firm, Cole entered options orders that he did not intend to execute

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which allowed him to buy options at artificially low prices and sell at artificially
high prices.
31. Cole generally spoofed thinly traded options with a large NBBO
spread—a large difference between the National Best Bid and the National Best
Offer. He first placed   visible, day-limit orders on one side of the market, at a price
near the middle of the NBBO. Cole entered similar orders simultaneously across
different options series for the same stock. These limit orders shifted and narrowed
the NBBOs across options series, creating a false appearance of new or increased
trading interest in those options.
32. Cole then placed a flurry of immediate-or-cancel orders on the opposite
side of the market within the new, narrower NBBO spreads. Unlike his day-limit
orders, Cole’s immediate-or-cancel orders did not impact the National Best Bid or
the National Best Offer and those orders were not visible to the market unless and
until they were executed. Cole repeatedly submitted immediate-or-cancel orders
across related options series, hoping to buy at artificially lower prices or sell at
artificially higher prices.
33. Once Cole’s immediate-or-cancel orders were no longer being executed,
he cancelled his non-bona fide day-limit orders. This usually triggered an
immediate decrease in the National Best Bid (or increase in the National Best
Offer) and a return to the true market NBBO.
34. Cole then repeated the same spoofing scheme on the other side of the
market to lock in his profits.
35. Here is an example of how Cole’s scheme worked. On February 1, 2022,
Cole spoofed call options for the common stock of a company with a strike price of
$430 and an expiration date of March 4, 2022. Before Cole’s manipulative trading,
the National Best Bid for these options was $0.50 and the National Best Offer was
$5.30. These options were thinly-traded, far out-of-the-money (the underlying

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security was trading around $343 per share) and long-dated (set to expire in more
than a month).
36. At 9:40:12 a.m., Cole placed a day-limit order to sell 11 contracts for
these call options at a price of $1.80, which was posted on a national exchange that
Cole selected. This order was visible to the market, and it    generated a new National
Best Offer of $1.80—down from $5.30 before Cole’s spoof order.
37. Once the new NBBO range was set and reported, Cole then submitted
immediate-or-cancel orders to buy one call option contract on an exchange that was
different from the exchanges he had selected for his day-limit sell order.
38. At 9:42:11 a.m., one of Cole’s immediate-or-cancel buy orders executed
at the price of $1.40. He then placed immediate-or-cancel orders to buy 20 contracts
of the same options. One of those 20-contract orders was executed at the price of
$1.50. Cole submitted more immediate-or-cancel buy orders for 20 contracts each,
but no more orders were executed.
39. At 9:50:41 a.m., Cole cancelled his spoof day-limit sell order, and
within seconds the National Best Offer rose from $1.80 to $4.80.
40. At this point, Cole had spent $3,140 to purchase 21 contracts for these
options.
41. To lock in his profits from this manipulation, Cole repeated the same
spoofing scheme on the other side of the market. At 9:51:59 a.m., Cole placed a day-
limit order to buy 11 of the same call option contracts at a price of $1.60, which was
posted on a national exchange that Cole selected. This order was visible to the
market and increased the National Best Bid from $0.10 to $1.60.
42. At 9:53:13 a.m., Cole began to submit immediate-or-cancel orders to
sell one call option contract on an exchange different from the one selected for his
day-limit buy order. As soon as an order executed at a price of $2.21, Cole submitted
multiple immediate-or-cancel orders, each offering to sell 20 contracts. One order for
20 contracts was ultimately executed at a price of $2.12.

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43. After entering four more immediate-or-cancel sell orders for 20
contracts each, without receiving an execution, Cole canceled his spoof day-limit buy
order at 9:55:01 a.m. Approximately two seconds later, the National Best Bid for
those options fell from $1.60 to $0.50.
44. In summary, between around 9:40 and 9:55 a.m. on February 1, 2022,
Cole bought 21 contracts for these options at $3,140 and then sold the 21 contracts
for $4,461—locking in an illicit profit of $1,321 in around 15 minutes. Note that
Cole’s profit for this window was actually higher because while Cole was engaging
in spoofing on the March 4, 2022 $430 call option series, he was placing related
spoofing orders on the $435 and $440 call options series for the same underlying
stock, manipulating those prices, and reaping additional illicit profits of around
$4,600.
III. Cole Tried to Conceal His Scheme and Was Terminated.
45. The Firm required Cole to submit daily reports of his trading activity
via firm-wide emails. In those reports, Cole identified his successful trades and
described strategies he was purportedly executing. However, Cole did not disclose
his spoofing strategy or any part of that strategy, including (i) the placement of
opposite-side trades on different exchanges, (ii) the extremely high cancellation
rates of his visible day-limit orders, (iii) the low execution rates of his visible day-
limit orders, (iv) the impact on the NBBO from placing and canceling visible day-
limit orders, and (v) the single-contract, immediate-or-cancel orders followed by
higher contract-volume orders (as in the example above, where single-contract
orders were followed by 20-contract orders).
46. On at least two separate occasions, members of the Firm’s senior
management, including the Firm’s Chief Compliance Officer, questioned Cole
directly about his “methodology” and the trading “strategies” he was employing. In
response, Cole supplied false and misleading statements.

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47. On November 8, 2021, for example, the Firm’s Chief Compliance
Officer told Cole that the Firm sought “a better understanding of the strategy,” and
asked for “a description of the selection process, specific strategy, along with the
intended outcome” for each of Cole’s “current positions.” The Chief Compliance
Officer explained that this information was being requested “to confirm
compliance.” Cole submitted a list of strategies he was purportedly using, including
trading based on such themes as COVID-19 and Bitcoin, trading based on
information obtained from news services, and price-based “momentum” trading.
However, nowhere in his response did Cole disclose his spoofing strategy nor any
key components of that strategy.
48. On February 2, 2022, the Chief Compliance Officer reviewed Cole’s
trading activity and told him that his “order placement, cancellations and
executions [we]re extremely concerning” and that Cole’s approach was “not
consistent” with the strategies that Cole had earlier described to the Chief
Compliance Officer.
49. The Chief Compliance Officer then asked Cole to provide written
answers to a series of trading questions “with very specific detail.”
50. The Chief Compliance Officer’s questions reflected concerns of
potential spoofing activity, including (i) whether or not Cole believed his trading
was “impacting the market,” (ii) why Cole was “loading up on a term structure and
canceling,” and (iii) whether Cole’s orders were “entered with the intent to be
executed,” given that his “execution ratio” for certain orders reflected “little to no
likelihood” of execution.
51. Despite the Chief Compliance Officer’s stated concerns and requests
for very specific detail, Cole’s answers were short and non-responsive. For example,
in response to a question on the market impact of his orders, Cole responded that
“all activity in the market has some way of impacting price.”

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52. Dissatisfied with Cole’s responses, the Firm’s Chief Compliance Officer
recommended that the Firm terminate Cole.
53. A week later, on February 9, 2022, the Firm terminated Cole’s
employment.
FIRST CLAIM FOR RELIEF
Fraud in Violation of Sections 17(a)(1) and (3) of the Securities Act
54. The SEC realleges and incorporates by reference each and every
allegation in paragraphs 1 through 53, inclusive, as if they were fully set forth
herein.
55. As set forth above, Defendant Cole engaged in a scheme to
fraudulently manipulate the prices of thinly traded options by placing spoof orders
that he had no intention of executing. Cole then profited from his scheme by
executing orders at the resulting manipulated prices. He knew, or was reckless or
negligent in not knowing, that this type of trading was illegal because, among other
things, he attended annual compliance trainings that warned him against spoofing.
Cole acted with scienter and took steps to conceal his spoofing from the Firm.
56. By virtue of the foregoing, Cole, directly or indirectly, in the offer or
sale of securities, and by the use of the means of instruments of transportation or
communication in interstate commerce or the mails:
a) Knowingly or recklessly employed one or more devices, schemes or
artifices to defraud; and
b) Knowingly, recklessly, or negligently engaged in one or more
transactions, practices or courses of business which operated or
would operate as a fraud or deceit upon the purchaser.
57. By virtue of the foregoing, Cole violated and, unless restrained and
enjoined, will again violate, Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C.
§§ 77q(a)(1) and (3)].

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SECOND CLAIM FOR RELIEF
Fraud in Violation of Section 10(b) of the Exchange Act and
Rules 10b-5(a) and (c) thereunder
58. The SEC realleges and incorporates by reference each and every
allegation in paragraphs 1 through 53, inclusive, as if they were fully set forth
herein.
59. As set forth above, Defendant Cole engaged in a scheme to
fraudulently manipulate the prices of thinly traded options by placing spoof orders
that he had no intention of executing. Cole then profited from his scheme by
executing orders at the resulting manipulated prices. He knew, or was reckless in
not knowing, that this type of trading was illegal because, among other things, he
attended annual compliance trainings that warned him against spoofing. Cole acted
with scienter and took steps to conceal his spoofing from the Firm.
60. By virtue of the foregoing, Cole directly or indirectly, in connection
with the purchase or sale of a security, by use of the means or instruments of
interstate commerce, or of the mails, or the facilities of a national securities
exchange, knowingly or recklessly:
a) Employed one or more devices, schemes, or artifices to defraud; and
b) Engaged in acts, practices, or courses of business which operated or
would operate as a fraud or deceit upon others.
61. By virtue of the foregoing, Cole violated and, unless restrained and
enjoined, will again violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)]
and Rules 10b-5(a) and (c) [17 C.F.R. §§ 240.10b-5(a), (c)] thereunder.
THIRD CLAIM FOR RELIEF
Violation of Section 9(a)(2) of the Exchange Act
62. The SEC realleges and incorporates by reference each and every
allegation in paragraphs 1 through 53, inclusive, as if they were fully set forth
herein.

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT

63. As set forth above, Defendant Cole engaged in a scheme to
fraudulently manipulate the prices of thinly traded options by placing spoof orders
that he had no intention of executing. Cole then profited from his scheme by
executing orders at the resulting manipulated prices. He knew, or was reckless in
now knowing, that this type of trading was illegal because, among other things, he
attended annual compliance trainings that warned him against spoofing. Cole acted
with scienter and took steps to conceal his spoofing from the Firm.
64. By virtue of the foregoing, Cole, directly or indirectly, by the use of the
mails or any means or instrumentality of interstate commerce, or of any facility of
any national securities exchange, effected, alone or with one or more other persons,
a series of transactions in a security creating actual or apparent active trading in
such security, or raising or depressing the price of such security, for the purpose of
inducing the purchase or sale of such security by others.
65. By reason of the foregoing, Cole violated and, unless enjoined, will
again violate Exchange Act Section 9(a)(2) [15 U.S.C. § 78i(a)(2)].
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that this Court enter a Final
Judgment that:
a) Finds that Cole violated federal securities laws as alleged in this
Complaint;
b) Orders Cole to disgorge, with prejudgment interest, all illicit
trading profits or other ill-gotten gains received, directly or
indirectly, as a result of the conduct alleged in this Complaint;
c) Orders Cole to pay a civil monetary penalty pursuant to Section
20(d) of the Securities Act [15 U.S.C. § 77t(d)]; and Section 21(d)(3)
of the Exchange Act [15 U.S.C. § 78u(d)(3)];
d) Permanently restrains and enjoins Cole from violating, directly or
indirectly, Section 9(a)(2) of the Securities Exchange Act of 1934

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(the “Exchange Act”) [15 U.S.C. § 78i(a)(2)], by using any means or
instrumentality of interstate commerce, or of the mails, or of any
facility of any national securities exchange, in connection with the
purchase or sale of any security to effect a series of transactions in
any security registered on a national securities exchange, any
security not so registered, or in connection with any security-based
swap or security-based swap agreement with respect to such
security creating actual or apparent active trading in such security,
or raising or depressing the price of such security, for the purpose of
inducing the purchase or sale of such security by others;
e) Permanently restrains and enjoins Cole from violating, directly or
indirectly, Section 10(b) of the Securities Exchange Act of 1934 (the
“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and (c)
promulgated thereunder [17 C.F.R. § 240.10b-5(a) and (c)], by using
any means or instrumentality of interstate commerce, or of the
mails, or of any facility of any national securities exchange, in
connection with the purchase or sale of any security; to employ any
device, scheme, or artifice to defraud, or to engage in any act,
practice, or course of business which operates or would operate as a
fraud or deceit upon any person.
f) Permanently restrains and enjoins Cole from violating Sections
17(a)(1) and (3) of the Securities Act of 1933 (the “Securities Act”)
[15 U.S.C. § 77q(a)(1) and (3)] in the offer or sale of any security by
the use of any means or instruments of transportation or
communication in interstate commerce or by use of the mails,
directly or indirectly; to employ any device, scheme, or artifice to
defraud or to engage in any transaction, practice, or course of

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business which operates or would operate as a fraud or deceit upon
the purchaser;
g) Enjoins Cole, for a period of five years, from, directly or indirectly,
opening, maintaining or trading in any brokerage account(s) in his
name, the names of any immediate family members, the names of
any company over which he has any control or the names of any
third party individual(s), without providing the relevant broker-
dealer(s) a copy of the complaint and final judgment entered
against him in this action, pursuant to Section 20(b) of the
Securities Act [15 U.S.C. § 77t(b)] and Section 21(d)(5) of the
Exchange Act [15 U.S.C. §§ 78u(d)(5)]; and
h) Grants   such other and further relief as the Court may deem just
and proper.
JURY DEMAND
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff
demands that this case be tried before a jury.

DATE: August 11, 2025 /s/ Zachary A. Avallone
ZACHARY A. AVALLONE
           (CA Bar No. 295545)
     Telephone: (202) 551-4479
     Email: [email protected]
ANDREW MCFALL
     Telephone: (202) 551-5538
     Email: [email protected]
SETH NADLER
     Telephone: (202) 551-7391
     Email: [email protected]

Securities and Exchange Commission
Division of Enforcement
100 F Street NE
Washington, DC 20549

Counsel for Plaintiff
Securities and Exchange Commission

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ZACHARY A. AVALLONE (CA Bar No. 295545) 
     Telephone: (202) 551-4479 
     Email: [email protected] 
ANDREW MCFALL 
     Telephone: (202) 551-5538 
     Email: [email protected] 
SETH NADLER 
     Telephone: (202) 551-7391 
     Email: [email protected] 

Securities and Exchange Commission 
Division of Enforcement 
100 F Street NE 
Washington, DC 20549 

Counsel for Plaintiff  
Securities and Exchange Commission 

UNITED STATES DISTRICT COURT 
EASTERN DISTRICT OF CALIFORNIA 

SACRAMENTO DIVISION 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

v. 

RYAN N. COLE, 

Defendant. 

Case No. 25-cv-1038 

COMPLAINT JURY 

DEMAND 

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT 
 

Plaintiff Securities and Exchange Commission (the “SEC”) files this 

Complaint against Defendant Ryan N. Cole (“Cole”) and alleges as follows: 

SUMMARY OF THE ACTION 

1. While working as a trader for a financial firm (the “Firm”), Defendant 

Cole perpetrated a manipulative trading scheme known as spoofing. Cole placed 

fake—or spoof—orders to manipulate the prices of thinly traded options, and then 

he executed different orders at the resulting manipulated prices. By repeatedly 

engaging in this fraudulent conduct, Cole obtained approximately $234,000 in ill-

gotten gains from this scheme.  

2. Cole’s spoofing scheme worked like this: he first placed orders for 

options that were thinly traded and had a large spread between the National Best 

Bid and the National Best Offer. Cole’s spoof orders were visible to the market, 

were priced either significantly lower than the current best offer or significantly 

higher than the current best bid. He sometimes placed spoof orders across 

neighboring options series referencing the same underlying security. By narrowing 

the spread between the National Best Bid and Offer across options series, Cole 

attracted the attention of other market participants to these thinly traded options. 

Cole’s spoof orders, however, were non-bona fide orders that he did not intend to 

execute—instead, they were designed to induce other market participants to trade 

these securities at manipulated prices, and Cole cancelled most of his spoof orders 

relatively quickly. 

3. After these spoof orders shifted the market by narrowing the National 

Best Bid and Offer spread across neighboring option series, Cole placed coordinated 

immediate-or-cancel orders on the opposite side of the market within the newly 

established price range across options series, usually on a different exchange, some 

of which, due to the market attention drawn by his spoof orders, were executed. To 

facilitate desired executions across the neighboring options series in which he had 

placed spoof orders, Cole used the complex order book to place multi-leg immediate-

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or-cancel orders. After his immediate-or-cancel orders were executed, Cole then 

cancelled his spoof orders, which had the effect of returning the National Best Bid 

and Offer spread to true market levels. 

4. To close out his position, Cole then repeated these same steps on the 

opposite side of the market—first using a publicly viewable spoof order to set a new 

National Best Bid or National Best Offer and then submitting immediate-or-cancel 

orders to lock in his ill-gotten gains. 

5. Through this scheme, Cole used spoof option orders—option orders 

that he never had any intention of executing—to artificially deflate or inflate the 

price of thinly traded options. He then profited by buying and selling those same 

options at artificial prices. This practice has long been recognized as an illegal, 

fraudulent scheme and a form of market manipulation.  

6. Cole knew or was reckless in not knowing that this type of trading was 

illegal. As part of his job as a trader, he attended annual compliance trainings led 

by the Firm’s Chief Compliance Officer, including training on improper strategies 

such as spoofing. 

7. Cole also took steps to conceal his spoofing from the Firm. When Firm 

senior management, including the Chief Compliance Officer, asked Cole about his 

daily trading activity, Cole provided false and misleading responses.  

8. In early February 2022, the Firm’s Chief Compliance Officer asked 

Cole a series of questions about his trading that appeared to reflect spoofing activity 

and requested that Cole provide responses “with very specific detail.” Cole’s 

answers were short, non-responsive, and failed to address the indicia of spoofing 

that the Chief Compliance Officer raised. 

9. Dissatisfied with Cole’s responses, the Firm terminated Cole’s 

employment.  

10. By perpetrating the spoofing scheme and as alleged further in this 

Complaint, Cole violated, and unless enjoined will continue to violate, Sections 

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17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. 

§§ 77q(a)(1) and (3)], and Sections 9(a)(2) and 10(b) of the Securities Exchange Act 

of 1934 (“Exchange Act”) [15 U.S.C. §§ 78i(a)(2) and 78j(b)], and Rules 10b-5(a) and 

(c) thereunder [17 C.F.R. §§ 240.10b-5(a), (c)]. 

JURISDICTION AND VENUE 

11. The SEC brings this action, and this Court has subject matter 

jurisdiction over this action, pursuant to Sections 20(b), 20(d), and 22(a) of the 

Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)], and Sections 21(d), 21(e), and 

27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. Cole, directly or 

indirectly, made use of the mails, or the means and instrumentalities of interstate 

commerce, or the facilities of national securities exchanges, in connection with the 

transactions, acts, practices, and courses of business alleged in this complaint. 

12. Venue is proper under Section 22(a) of the Securities Act [15 U.S.C. 

§ 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa] because the 

Defendant can be found within the Eastern District of California. He currently 

splits his time between Nevada and a residence in Folsom, California. 

DEFENDANT  

13. Ryan N. Cole, age 39, is a former day trader and has never held any 

securities licenses. Cole worked at the Firm from May 2018 through February 2022.  

TERMS USED IN THIS COMPLAINT 

14. Options are a contract that gives the owner the right, but not the 

obligation, to buy or sell a specific quantity of an asset at a specific price (“strike 

price”) on or before a specific date (“expiration”). Options for securities are 

frequently sold as one contract representing 100 shares of a stock. 

15. Option series refers to the same type of options (e.g., a put or a call) for 

an underlying security with the same strike price and expiration. 

16. Spoofing refers to a type of market manipulation scheme where a 

trader enters non-bona fide orders to create a false appearance of new or increased 

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trading interest in a security. Spoofers induce others to place orders priced at or 

better than the spoofer’s non-bona fide orders. Spoofing creates artificial market 

conditions that benefit the spoofer’s interests while harming other market 

participants. 

17. National Best Bid is the highest reported price a buyer is willing to pay 

to buy a security.  

18. National Best Offer is the lowest reported price that a seller is willing 

to accept to sell a security.  

19. NBBO. The spread between the National Best Bid and National Best 

Offer is referred to as the “NBBO.” The NBBO is publicly reported to the market 

and represents the tightest bid-ask spread for a particular security. 

20. Thinly traded securities are securities that have low trading volume. 

As compared to more actively traded securities with greater trading volume, thinly 

traded securities often have fewer interested buyers and sellers and larger NBBO 

spreads. Thus, a small number of orders or trades can substantially impact the 

market prices of thinly traded securities, rendering them more susceptible to 

manipulation than securities that are more actively traded. 

21. Limit orders can only be executed if the market price reaches the limit 

price. A buy limit order can only be executed at the limit price or lower, and a sell 

limit order can only be executed at the limit price or higher. While limit orders do 

not guarantee execution, they help ensure that an investor does not pay more than 

a pre-determined price.  

22. Day-limit orders are limit orders to buy or sell a security at a specific 

price or better and which are automatically canceled if they remain unexecuted by 

the end of the trading day. While day-limit orders are open, they are publicly visible 

and can affect the NBBO. 

23. Immediate-or-cancel orders are a type of limit order that must be 

executed immediately upon their placement. Any portion of an immediate-or-cancel 

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order that cannot be filled immediately will be cancelled. Given the nature of an 

immediate-or-cancel order, it does not affect the NBBO and is not publicly visible 

unless and until it is executed. 

24. Multi-leg orders are a type of complex order for two or more different 

options series (“legs”).  

25. Complex Order Book enables market participants to place multi-leg 

options orders. 

FACTS 

I. The Firm Hired Cole and Warned Him Not to Spoof.  

26. In May 2018, the Firm hired Cole to trade an account funded by the 

Firm. Cole was paid an annual salary and was eligible for a performance-based 

bonus. 

27. Starting in January 2019, and annually thereafter, Cole received 

training from the Firm’s Chief Compliance Officer on disruptive trading practices 

and improper order behavior. The Chief Compliance Officer explained that Cole and 

other employees were prohibited from spoofing, which the training materials 

described as entering orders without any intention of executing those orders for the 

purpose of driving the market price of a security up or down.  

28. The Firm also explained to Cole that it monitored its traders’ activity 

for manipulative order behavior by reviewing, among other things, a trader’s 

cancellation ratio, pattern and practice of order placement, and a trader’s overall 

volume as a percentage of the market.  

29. The Firm told Cole that engaging in improper order behavior could 

result in termination of his employment, legal action, and an industry bar. 

II. Cole Engaged in Manipulative Trading. 

30. Despite the Firm’s training, Cole engaged in spoofing on an almost 

daily basis from September 2020 through February 2022. Using accounts and assets 

belonging to the Firm, Cole entered options orders that he did not intend to execute 

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which allowed him to buy options at artificially low prices and sell at artificially 

high prices. 

31. Cole generally spoofed thinly traded options with a large NBBO 

spread—a large difference between the National Best Bid and the National Best 

Offer. He first placed visible, day-limit orders on one side of the market, at a price 

near the middle of the NBBO. Cole entered similar orders simultaneously across 

different options series for the same stock. These limit orders shifted and narrowed 

the NBBOs across options series, creating a false appearance of new or increased 

trading interest in those options. 

32. Cole then placed a flurry of immediate-or-cancel orders on the opposite 

side of the market within the new, narrower NBBO spreads. Unlike his day-limit 

orders, Cole’s immediate-or-cancel orders did not impact the National Best Bid or 

the National Best Offer and those orders were not visible to the market unless and 

until they were executed. Cole repeatedly submitted immediate-or-cancel orders 

across related options series, hoping to buy at artificially lower prices or sell at 

artificially higher prices. 

33. Once Cole’s immediate-or-cancel orders were no longer being executed, 

he cancelled his non-bona fide day-limit orders. This usually triggered an 

immediate decrease in the National Best Bid (or increase in the National Best 

Offer) and a return to the true market NBBO. 

34. Cole then repeated the same spoofing scheme on the other side of the 

market to lock in his profits. 

35. Here is an example of how Cole’s scheme worked. On February 1, 2022, 

Cole spoofed call options for the common stock of a company with a strike price of 

$430 and an expiration date of March 4, 2022. Before Cole’s manipulative trading, 

the National Best Bid for these options was $0.50 and the National Best Offer was 

$5.30. These options were thinly-traded, far out-of-the-money (the underlying 

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security was trading around $343 per share) and long-dated (set to expire in more 

than a month). 

36. At 9:40:12 a.m., Cole placed a day-limit order to sell 11 contracts for 

these call options at a price of $1.80, which was posted on a national exchange that 

Cole selected. This order was visible to the market, and it generated a new National 

Best Offer of $1.80—down from $5.30 before Cole’s spoof order. 

37. Once the new NBBO range was set and reported, Cole then submitted 

immediate-or-cancel orders to buy one call option contract on an exchange that was 

different from the exchanges he had selected for his day-limit sell order. 

38. At 9:42:11 a.m., one of Cole’s immediate-or-cancel buy orders executed 

at the price of $1.40. He then placed immediate-or-cancel orders to buy 20 contracts 

of the same options. One of those 20-contract orders was executed at the price of 

$1.50. Cole submitted more immediate-or-cancel buy orders for 20 contracts each, 

but no more orders were executed. 

39. At 9:50:41 a.m., Cole cancelled his spoof day-limit sell order, and 

within seconds the National Best Offer rose from $1.80 to $4.80. 

40. At this point, Cole had spent $3,140 to purchase 21 contracts for these 

options.  

41. To lock in his profits from this manipulation, Cole repeated the same 

spoofing scheme on the other side of the market. At 9:51:59 a.m., Cole placed a day-

limit order to buy 11 of the same call option contracts at a price of $1.60, which was 

posted on a national exchange that Cole selected. This order was visible to the 

market and increased the National Best Bid from $0.10 to $1.60. 

42. At 9:53:13 a.m., Cole began to submit immediate-or-cancel orders to 

sell one call option contract on an exchange different from the one selected for his 

day-limit buy order. As soon as an order executed at a price of $2.21, Cole submitted 

multiple immediate-or-cancel orders, each offering to sell 20 contracts. One order for 

20 contracts was ultimately executed at a price of $2.12. 

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43. After entering four more immediate-or-cancel sell orders for 20 

contracts each, without receiving an execution, Cole canceled his spoof day-limit buy 

order at 9:55:01 a.m. Approximately two seconds later, the National Best Bid for 

those options fell from $1.60 to $0.50. 

44. In summary, between around 9:40 and 9:55 a.m. on February 1, 2022, 

Cole bought 21 contracts for these options at $3,140 and then sold the 21 contracts 

for $4,461—locking in an illicit profit of $1,321 in around 15 minutes. Note that 

Cole’s profit for this window was actually higher because while Cole was engaging 

in spoofing on the March 4, 2022 $430 call option series, he was placing related 

spoofing orders on the $435 and $440 call options series for the same underlying 

stock, manipulating those prices, and reaping additional illicit profits of around 

$4,600. 

III. Cole Tried to Conceal His Scheme and Was Terminated. 

45. The Firm required Cole to submit daily reports of his trading activity 

via firm-wide emails. In those reports, Cole identified his successful trades and 

described strategies he was purportedly executing. However, Cole did not disclose 

his spoofing strategy or any part of that strategy, including (i) the placement of 

opposite-side trades on different exchanges, (ii) the extremely high cancellation 

rates of his visible day-limit orders, (iii) the low execution rates of his visible day-

limit orders, (iv) the impact on the NBBO from placing and canceling visible day-

limit orders, and (v) the single-contract, immediate-or-cancel orders followed by 

higher contract-volume orders (as in the example above, where single-contract 

orders were followed by 20-contract orders). 

46. On at least two separate occasions, members of the Firm’s senior 

management, including the Firm’s Chief Compliance Officer, questioned Cole 

directly about his “methodology” and the trading “strategies” he was employing. In 

response, Cole supplied false and misleading statements. 

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47. On November 8, 2021, for example, the Firm’s Chief Compliance 

Officer told Cole that the Firm sought “a better understanding of the strategy,” and 

asked for “a description of the selection process, specific strategy, along with the 

intended outcome” for each of Cole’s “current positions.” The Chief Compliance 

Officer explained that this information was being requested “to confirm 

compliance.” Cole submitted a list of strategies he was purportedly using, including 

trading based on such themes as COVID-19 and Bitcoin, trading based on 

information obtained from news services, and price-based “momentum” trading. 

However, nowhere in his response did Cole disclose his spoofing strategy nor any 

key components of that strategy. 

48. On February 2, 2022, the Chief Compliance Officer reviewed Cole’s 

trading activity and told him that his “order placement, cancellations and 

executions [we]re extremely concerning” and that Cole’s approach was “not 

consistent” with the strategies that Cole had earlier described to the Chief 

Compliance Officer. 

49. The Chief Compliance Officer then asked Cole to provide written 

answers to a series of trading questions “with very specific detail.”  

50. The Chief Compliance Officer’s questions reflected concerns of 

potential spoofing activity, including (i) whether or not Cole believed his trading 

was “impacting the market,” (ii) why Cole was “loading up on a term structure and 

canceling,” and (iii) whether Cole’s orders were “entered with the intent to be 

executed,” given that his “execution ratio” for certain orders reflected “little to no 

likelihood” of execution.  

51. Despite the Chief Compliance Officer’s stated concerns and requests 

for very specific detail, Cole’s answers were short and non-responsive. For example, 

in response to a question on the market impact of his orders, Cole responded that 

“all activity in the market has some way of impacting price.”  

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52. Dissatisfied with Cole’s responses, the Firm’s Chief Compliance Officer 

recommended that the Firm terminate Cole.  

53. A week later, on February 9, 2022, the Firm terminated Cole’s 

employment.  

FIRST CLAIM FOR RELIEF 

Fraud in Violation of Sections 17(a)(1) and (3) of the Securities Act 

54. The SEC realleges and incorporates by reference each and every 

allegation in paragraphs 1 through 53, inclusive, as if they were fully set forth 

herein.  

55. As set forth above, Defendant Cole engaged in a scheme to 

fraudulently manipulate the prices of thinly traded options by placing spoof orders 

that he had no intention of executing. Cole then profited from his scheme by 

executing orders at the resulting manipulated prices. He knew, or was reckless or 

negligent in not knowing, that this type of trading was illegal because, among other 

things, he attended annual compliance trainings that warned him against spoofing. 

Cole acted with scienter and took steps to conceal his spoofing from the Firm.  

56. By virtue of the foregoing, Cole, directly or indirectly, in the offer or 

sale of securities, and by the use of the means of instruments of transportation or 

communication in interstate commerce or the mails:  

a) Knowingly or recklessly employed one or more devices, schemes or 

artifices to defraud; and 

b) Knowingly, recklessly, or negligently engaged in one or more 

transactions, practices or courses of business which operated or 

would operate as a fraud or deceit upon the purchaser.  

57. By virtue of the foregoing, Cole violated and, unless restrained and 

enjoined, will again violate, Sections 17(a)(1) and (3) of the Securities Act [15 U.S.C. 

§§ 77q(a)(1) and (3)]. 

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SECOND CLAIM FOR RELIEF 

Fraud in Violation of Section 10(b) of the Exchange Act and  

Rules 10b-5(a) and (c) thereunder 

58. The SEC realleges and incorporates by reference each and every 

allegation in paragraphs 1 through 53, inclusive, as if they were fully set forth 

herein. 

59. As set forth above, Defendant Cole engaged in a scheme to 

fraudulently manipulate the prices of thinly traded options by placing spoof orders 

that he had no intention of executing. Cole then profited from his scheme by 

executing orders at the resulting manipulated prices. He knew, or was reckless in 

not knowing, that this type of trading was illegal because, among other things, he 

attended annual compliance trainings that warned him against spoofing. Cole acted 

with scienter and took steps to conceal his spoofing from the Firm.  

60. By virtue of the foregoing, Cole directly or indirectly, in connection 

with the purchase or sale of a security, by use of the means or instruments of 

interstate commerce, or of the mails, or the facilities of a national securities 

exchange, knowingly or recklessly:  

a) Employed one or more devices, schemes, or artifices to defraud; and  

b) Engaged in acts, practices, or courses of business which operated or 

would operate as a fraud or deceit upon others. 

61. By virtue of the foregoing, Cole violated and, unless restrained and 

enjoined, will again violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] 

and Rules 10b-5(a) and (c) [17 C.F.R. §§ 240.10b-5(a), (c)] thereunder. 

THIRD CLAIM FOR RELIEF 

Violation of Section 9(a)(2) of the Exchange Act 

62. The SEC realleges and incorporates by reference each and every 

allegation in paragraphs 1 through 53, inclusive, as if they were fully set forth 

herein. 

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63. As set forth above, Defendant Cole engaged in a scheme to 

fraudulently manipulate the prices of thinly traded options by placing spoof orders 

that he had no intention of executing. Cole then profited from his scheme by 

executing orders at the resulting manipulated prices. He knew, or was reckless in 

now knowing, that this type of trading was illegal because, among other things, he 

attended annual compliance trainings that warned him against spoofing. Cole acted 

with scienter and took steps to conceal his spoofing from the Firm.  

64. By virtue of the foregoing, Cole, directly or indirectly, by the use of the 

mails or any means or instrumentality of interstate commerce, or of any facility of 

any national securities exchange, effected, alone or with one or more other persons, 

a series of transactions in a security creating actual or apparent active trading in 

such security, or raising or depressing the price of such security, for the purpose of 

inducing the purchase or sale of such security by others. 

65. By reason of the foregoing, Cole violated and, unless enjoined, will 

again violate Exchange Act Section 9(a)(2) [15 U.S.C. § 78i(a)(2)]. 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that this Court enter a Final 

Judgment that: 

a) Finds that Cole violated federal securities laws as alleged in this 

Complaint; 

b) Orders Cole to disgorge, with prejudgment interest, all illicit 

trading profits or other ill-gotten gains received, directly or 

indirectly, as a result of the conduct alleged in this Complaint; 

c) Orders Cole to pay a civil monetary penalty pursuant to Section 

20(d) of the Securities Act [15 U.S.C. § 77t(d)]; and Section 21(d)(3) 

of the Exchange Act [15 U.S.C. § 78u(d)(3)];  

d) Permanently restrains and enjoins Cole from violating, directly or 

indirectly, Section 9(a)(2) of the Securities Exchange Act of 1934 

Case 2:25-at-01038     Document 1     Filed 08/11/25     Page 13 of 15



 

 
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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT 
 

(the “Exchange Act”) [15 U.S.C. § 78i(a)(2)], by using any means or 

instrumentality of interstate commerce, or of the mails, or of any 

facility of any national securities exchange, in connection with the 

purchase or sale of any security to effect a series of transactions in 

any security registered on a national securities exchange, any 

security not so registered, or in connection with any security-based 

swap or security-based swap agreement with respect to such 

security creating actual or apparent active trading in such security, 

or raising or depressing the price of such security, for the purpose of 

inducing the purchase or sale of such security by others; 

e) Permanently restrains and enjoins Cole from violating, directly or 

indirectly, Section 10(b) of the Securities Exchange Act of 1934 (the 

“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and (c) 

promulgated thereunder [17 C.F.R. § 240.10b-5(a) and (c)], by using 

any means or instrumentality of interstate commerce, or of the 

mails, or of any facility of any national securities exchange, in 

connection with the purchase or sale of any security; to employ any 

device, scheme, or artifice to defraud, or to engage in any act, 

practice, or course of business which operates or would operate as a 

fraud or deceit upon any person. 

f) Permanently restrains and enjoins Cole from violating Sections 

17(a)(1) and (3) of the Securities Act of 1933 (the “Securities Act”) 

[15 U.S.C. § 77q(a)(1) and (3)] in the offer or sale of any security by 

the use of any means or instruments of transportation or 

communication in interstate commerce or by use of the mails, 

directly or indirectly; to employ any device, scheme, or artifice to 

defraud or to engage in any transaction, practice, or course of 

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SECURITIES AND EXCHANGE COMMISSION V. RYAN N. COLE — COMPLAINT 
 

business which operates or would operate as a fraud or deceit upon 

the purchaser; 

g) Enjoins Cole, for a period of five years, from, directly or indirectly, 

opening, maintaining or trading in any brokerage account(s) in his 

name, the names of any immediate family members, the names of 

any company over which he has any control or the names of any 

third party individual(s), without providing the relevant broker-

dealer(s) a copy of the complaint and final judgment entered 

against him in this action, pursuant to Section 20(b) of the 

Securities Act [15 U.S.C. § 77t(b)] and Section 21(d)(5) of the 

Exchange Act [15 U.S.C. §§ 78u(d)(5)]; and 

h) Grants such other and further relief as the Court may deem just 

and proper. 

JURY DEMAND 

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff 

demands that this case be tried before a jury. 

 
DATE: August 11, 2025 /s/ Zachary A. Avallone   

ZACHARY A. AVALLONE  
           (CA Bar No. 295545) 
     Telephone: (202) 551-4479 
     Email: [email protected] 
ANDREW MCFALL 
     Telephone: (202) 551-5538 
     Email: [email protected] 
SETH NADLER 
     Telephone: (202) 551-7391 
     Email: [email protected] 
 
Securities and Exchange Commission 
Division of Enforcement 
100 F Street NE 
Washington, DC 20549 
 
Counsel for Plaintiff  
Securities and Exchange Commission 

Case 2:25-at-01038     Document 1     Filed 08/11/25     Page 15 of 15


	SUMMARY OF THE ACTION
	JURISDICTION AND VENUE
	DEFENDANT
	TERMS USED IN THIS COMPLAINT
	FACTS
	I. The Firm Hired Cole and Warned Him Not to Spoof.
	II. Cole Engaged in Manipulative Trading.
	III. Cole Tried to Conceal His Scheme and Was Terminated.

	FIRST CLAIM FOR RELIEF
	Fraud in Violation of Sections 17(a)(1) and (3) of the Securities Act
	SECOND CLAIM FOR RELIEF
	Fraud in Violation of Section 10(b) of the Exchange Act and
	Rules 10b-5(a) and (c) thereunder
	THIRD CLAIM FOR RELIEF
	Violation of Section 9(a)(2) of the Exchange Act
	PRAYER FOR RELIEF
	JURY DEMAND