Toronto Dominion Bank is set to pay over $20 million to resolve a fraud investigation stemming from a former employee's trading tactics that manipulated the U.S. Treasuries market.

The investigation uncovered that former trader Jeyakumar Nadarajah executed hundreds of fraudulent spoof orders, which generated tens of billions of dollars in false supply and demand within the U.S. Treasuries secondary market.

As part of the settlement, the bank will also pay a $12.5 million criminal penalty related to civil investigations conducted by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority.

In addition to these penalties, the bank has agreed to pay approximately $9.5 million as part of a deferred prosecution agreement, alongside $4.7 million in victim compensation and $1.4 million in forfeiture.

This settlement includes a three-year deferred prosecution agreement with U.S. authorities, as announced by the Department of Justice.

This development occurs amid ongoing scrutiny of the bank, which is reportedly nearing a guilty plea for failing to prevent money laundering associated with Chinese crime groups and illicit fentanyl sales.