A former Credit Suisse trader who saw the Bank of England's quantitative easing programme (QE) as "cake" to profit from has been fined nearly £700,000 by the City regulator after rigging the price of UK bonds.
Mark Stevenson was also banned from the industry by the Financial Conduct Authority (FCA) after his attempt to exploit QE - a £375 billion programme intended to help nurse the economy back to health.
The FCA found that he artificially ramped up the price of a £1.2 billion holding in a set of "gilts" - parcels of Government debt - hours before he intended to sell them to the Bank.
But his unusual trading was reported within 40 minutes and officials at Threadneedle Street decided not to buy the gilt, which it had been due to buy as part of QE.
The FCA found the trading had the potential to impact on taxpayers, since if the Bank had overpaid for the bond its losses would be shouldered by the Treasury.
Details of the episode in October 2011 surfaced publicly last summer when the Bank's executive director for markets, Paul Fisher, told MPs that claims about the "thoroughly reprehensible" allegations had been referred to the regulator.
It is the first enforcement action for manipulation of the gilt market, and comes in the wake of a series of market rigging scandals.
Banks have been fined billions for manipulation of the Libor interbank lending rate and world regulators are investigating allegations of foreign exchange rate rigging that threaten to become at least as serious.
Tracey McDermott, director of enforcement, said: "Stevenson's abuse took advantage of a policy designed to boost the economy with no regard for the potential consequences for other market
participants and, ultimately, for UK taxpayers.
"He has paid a heavy price for his actions.
"Fair dealing is at the heart of market integrity. This case sends a clear message about how seriously the FCA views attempts to manipulate the market."
The FCA described the actions of Mr Stevenson, a bond trader with nearly 30 years' experience, as "particularly egregious".
It added that the episode was the action of one trader on one day, and there was no evidence of collusion with other banks.
The FCA's findings described how the Bank of England had announced its latest tranche of bond buying as part of QE would take place on October 10, 2011.
Between 9am and 2.30pm on that day, Mr Stevenson "significantly increased" his holding in the relevant gilt, accounting for 92% of its turnover that day.
"Given his significant market experience he was fully aware of the impact this would have - and traded with the express intention of increasing the gilt's price."
But by 9.39am others in the market had notified the Bank of this unusual activity, saying the bond had been "squeezed" and "rammed".
One trader noted that it appeared to be a deliberate attempt to push the price higher in order to sell later in the day.
The gilt's performance significantly outperformed others in the market on the day but fell back after the Bank took the "unprecedented step" of announcing it would not be buying it.
Had it gone ahead with the trade, Mr Stevenson would have accounted for 70% of the £1.7 billion allocated to QE that day, the FCA found.
The findings also revealed details of a telephone conversation between Mr Stevenson and a broker days earlier, in which he said "we've been loading up with QE trades for months" and "QEs are...
The FCA concluded that he "was indicating his belief that QE was an opportunity to profit from selling gilts to the BoE [Bank of England]".
It added: "Mr Stevenson has stated that he bought the bond because he believed it was cheap and not with the definite intention of offering to sell it to the BoE later that day."
But the FCA concluded his trading was designed to move the price of the bond.
It also found Credit Suisse "stood to make significant sums of money" had the bond offer been
accepted by the Bank and Mr Stevenson would have "indirectly benefited".
Mr Stevenson was a director on the company's London bond trading desk, who was "able to trade with a large degree of autonomy".
The FCA said neither the firm nor any of its other employees were subject to criticism from the ruling.
Credit Suisse said: "We agree with the FCA's decision to sanction Mr Stevenson and are pleased to note that neither Credit Suisse nor any other employed individuals have been found at fault.
"The bank co-operated fully with the investigations into this matter by the Bank of England and Financial Conduct Authority."