The High Cost of Small Penalties: How Wall Street Market Manipulators Like Citadel Securities Treat Fines as the Cost of Doing Business

For decades, major financial institutions have faced allegations of market manipulation, insider trading, and various fraudulent schemes. Yet, the outcome remains largely the same: settlements with regulators, fines that barely dent their profits, and no admission of wrongdoing. This pattern is a growing concern on Wall Street, where some of the largest players, including market-making giant Citadel Securities, repeatedly engage in dubious practices, knowing the penalties won’t significantly impact their bottom lines.

The Problem: Fines That Barely Register

Market manipulation undermines trust in the financial system. When firms manipulate markets—whether through front-running trades, spoofing (placing orders they never intend to execute), or misleading investors—it creates an uneven playing field. Retail investors, pension funds, and small businesses often suffer, unaware they are participating in a rigged game. Meanwhile, large firms view the occasional fine as a minor inconvenience, far outweighed by the profits such behavior generates.

Take Citadel Securities as a prime example. In 2017, Citadel Securities paid a $22.6 million fine to the Securities and Exchange Commission (SEC) for misleading clients about trade execution. The SEC found that Citadel was not offering the best possible prices for customers, effectively front-running trades. At the time, Citadel Securities’ estimated revenue was around $3.5 billion for 2016.

This fine represented approximately 0.65% of Citadel Securities’ annual revenue, still a relatively trivial amount given the scale of the operation. Fast forward to 2020, and Citadel Securities generated $6.7 billion in revenue, illustrating how rapidly the firm has grown. Even if the 2017 fine were applied to 2020 revenues, it would represent just 0.34%—a drop in the bucket for a firm of Citadel’s size and influence.

This isn’t an isolated case. Between 2014 and 2022, Citadel Securities faced multiple fines for various infractions, totaling around $60 million. While that may seem significant, Citadel Securities generated $7 billion in profit in 2021 alone. The fines, which amount to less than 1% of their annual earnings, barely register as a cost of doing business. And Citadel is not alone. Many other large financial institutions have used the same playbook.

Citadel Securities, a part of Ken Griffin’s broader Citadel empire, plays a critical role in the financial markets, executing a staggering 40% of all U.S.-listed retail trading volume in 2022. That kind of influence means their actions can have a profound impact on market stability, price fairness, and investor confidence.

A Widespread Problem Across Wall Street

Citadel Securities’ example reflects a larger, systemic issue. Other financial giants, including JPMorgan Chase, Goldman Sachs, and Bank of America, have faced similar fines for market manipulation, yet none of them have seen their executives face meaningful criminal consequences.

Consider JPMorgan Chase, which in 2020 agreed to pay a record $920 million fine to settle charges that its traders manipulated precious metals and U.S. Treasury markets for nearly eight years through spoofing. The fine, while large, accounted for only about 3% of JPMorgan’s net income in 2020, which was $29.1 billion. Even more egregiously, none of the traders involved faced criminal prosecution, and the bank, as is standard, did not admit or deny guilt.

Goldman Sachs, too, has a long history of paying large fines while avoiding deeper accountability. In 2020, the bank agreed to pay $2.9 billion to settle charges related to its involvement in the massive 1MDB bribery scandal. While the fine was one of the largest ever levied against a Wall Street bank, Goldman’s net income for 2021 was $21.64 billion. The firm simply moved forward, with no significant consequences for senior executives.

The Precedent It Sets

When institutions like Citadel Securities or JPMorgan Chase can repeatedly pay fines without admitting guilt or facing criminal prosecution, it sends a dangerous message: for those with enough money and influence, breaking the law carries little personal or corporate risk.

The practice of “neither admitting nor denying” guilt has become a regulatory norm, designed to resolve cases quickly and allow regulators to claim victories. Yet, it fails to deliver justice or deter future wrongdoing. For large financial institutions, these fines are calculated into the cost-benefit analysis of their actions. If the profits from illegal activities far outweigh the potential fines, there is little reason to change course.

As former SEC Chair Mary Jo White once noted, “When misconduct occurs, companies may seek to treat financial penalties as a cost of doing business, one that can be calculated and managed.” This reality fosters a culture of impunity, where financial giants take calculated risks, knowing that any punishment will be financial and not personal.

Why Criminal Prosecution Matters

One of the most glaring failures in the current system is the lack of criminal prosecution for executives responsible for market manipulation. In almost all major cases of financial misconduct, individuals at the top remain untouched, while their firms pay off fines from company coffers.

Imagine a different scenario: a Wall Street executive who orchestrates a scheme that defrauds investors isn’t simply allowed to pay a fine and walk away. Instead, they face the same consequences that would befall anyone else caught committing a serious crime—criminal charges and prison time. Suddenly, the calculus changes. When personal freedom is at stake, the risks become far more real.

The financial system’s credibility hinges on trust, and that trust erodes every time an institution can buy its way out of accountability. Jail time for executives involved in market manipulation would restore faith in the system. It would send a strong message: that no one, no matter how wealthy or powerful, is above the law. While fines may be seen as a cost of doing business, the prospect of incarceration is far more sobering.

The 2008 financial crisis is a poignant reminder of this trend. Not a single senior executive from the major institutions that contributed to the crash—Lehman Brothers, AIG, Bear Stearns—faced criminal charges, despite evidence of widespread fraud and deception. The absence of personal consequences for those responsible has led to a system where executives feel insulated from their own misdeeds.

Contrast this with the few instances where criminal prosecution did take place, such as the case of Enron. Top executives like Jeffrey Skilling and Kenneth Lay were convicted of multiple felonies and faced prison time. The Enron case was a rare instance of accountability that showed how criminal prosecution can act as a true deterrent. Executives, when faced with the potential of going to prison, are far less likely to engage in market manipulation or fraud.

The Call for Stronger Measures

The data clearly shows that fines alone are insufficient to curb market manipulation. In 2022, the SEC collected a total of $4.2 billion in penalties and disgorgements. Yet, the overall scale of the U.S. financial markets—where trading volumes often exceed $500 billion per day—suggests that these fines are but a drop in the bucket.

To restore trust in the financial system, regulators need to step up enforcement efforts. This means not only imposing fines large enough to truly impact a firm’s bottom line but also pursuing criminal charges against individuals responsible for market manipulation. There is a growing chorus of experts and lawmakers calling for such reforms. For instance, Senator Elizabeth Warren has long advocated for stricter oversight and tougher penalties for financial crimes, including personal accountability for executives.

Moreover, the focus should shift to the real deterrent: prison time. Financial fines, no matter how large, are simply not enough to deter institutions whose profits reach into the tens of billions. Personal liability, including criminal prosecution, must become a serious consideration for executives. Without this, the same pattern will continue—firms will pay their fines, deny wrongdoing, and go back to business as usual.

Conclusion: Time for Change

The pattern of settling cases with a checkbook and no admission of guilt has outlived its usefulness. It’s a system designed to protect the powerful at the expense of the public. Without fundamental change—without making market manipulators face criminal consequences—Wall Street will remain a playground for fraudsters, while ordinary people bear the cost.

Regulators and lawmakers need to take a stronger stand. That means not only pushing for larger penalties that hit firms where it hurts—their bottom line—but also pursuing criminal charges against individuals when there is clear evidence of wrongdoing. Market manipulation is not just a violation of financial regulations; it is a crime, and it should be treated as such. It’s time to stop letting these institutions off the hook with settlements that amount to little more than a cost of doing business. If we are to truly restore faith in our markets, we must demand real accountability—and that means prison time for the worst offenders.

For too long, the financial elite have played by their own rules, and it’s time for that to change. Only by making the punishment fit the crime can we hope to deter the next generation of market manipulators. The stakes couldn’t be higher—for our markets, for investors, and for the future of our economy.