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March 8, 2023

A registered introducing broker, Coquest Inc., its owners Dennis Weinmann and John Vassallo, and trading firms Buttonwood LLC and Weva Properties Ltd. have been ordered to pay almost $3 million for using block trade order information from Coquest’s brokerage customers to obtain profits for Buttonwood and Weva accounts in which Weinmann had a financial interest.  The misconduct ran between 2015 and 2019 and involved more than 2,000 instances where Weinmann traded against his own customers’ interests.  CFTC

February 16, 2023

Derivative clearing organization (DCO) The Options Clearing Corporation (“OCC”) has been ordered to pay $17 million to the SEC and $5 million to the CFTC for its failure to establish, implement, maintain, and enforce policies and procedures to manage operational risks related to its automated systems, in violation of numerous rules and regulations, including the Commodity Exchange Act and CFTC regulations called DCO Core Principles.  Due to those deficiencies, between 2019 and 2021, OCC’s Clearing Fund was underfunded by $200 million to nearly $600 million.  OCC previously settled other charges with the SEC for $15 million and the CFTC for $5 million.  SEC; CFTC

December 21, 2022

Precious metals firm Monex Deposit Company, together with related entities and individual owners, have been ordered to pay a civil penalty of $5 million, and customer restitution of $33 million, to resolve claims arising from the defendants’ operation of a retail over-the-counter trading platform, known as “Atlas,” which allowed customers to speculate on precious metals price movements, with Monex acting as the counterparty to every transaction. While the defendants claimed in marketing that leveraged trading of precious metals was highly profitable, in fact, the majority of the trades resulted in losses for customers.  CFTC

December 20, 2022

Futures commission merchant CHS Hedging LLC will pay civil penalty of $6.5 million to resolve claims that it failed to implement an adequate AML program and failed to implement risk-based limits concerning trading in an account controlled by one of its customers that owned and controlled a ranching company and other related businesses.  The customer engaged in speculative trading that was inconsistent with its financial resources and hedging needs, and, over the course of four years, made net margin payments of more than $147 million to CHS Hedging.  The government alleged that the company did not adequately investigate the source of the customer’s funds or report the transactions as suspicious.  CFTC

October 13, 2022

Daniel Adam Hewko and his company, Main & Prospect Capital, LLC (MPC), have been ordered to pay over $7.9 million and be permanently barred from registering and trading with the CFTC, after they were found to have failed to register as an associate of a commodity pool operator, misappropriated client funds, and committed fraud.  Rather than invest client funds into a MPC-managed pooled investment vehicle called the Global Opportunity Fund, Hewko used the funds to benefit himself, his family, and unrelated companies, while issuing false statements to clients that showed false growth.  CFTC

September 30, 2022

BGC Derivative Markets, L.P. (BGCD) has been ordered to pay $1.9 million in civil penalties and to comply with certain undertakings in order to settle charges of failing to accurately report nearly 16,000 swap transactions to the CFTC.  The failures were a result of 14 separate reporting systems issues.  As a result of the settlement, BGCD will have to conduct a review of its swaps reporting program, implement a reconciliation process for those transactions, and submitted a written report to the CFTC in a year.  CFTC

September 29, 2022

CX Futures Exchange, L.P. has been ordered to pay $6.5 million and comply with certain conditions to settle charges of violating the Commodity Exchange Act and CFTC regulations.  The charges involved failing to comply with certain system safeguard regulations, failing to report certain data for over 200,000 options transactions, and falsely representing to CFTC staff that it was properly reporting such data.  CFTC

September 16, 2022

William Thomas Caniff and his company, Berkley Capital Management, LLC have been ordered to pay $2.6 million in restitution and a $3.6 million civil monetary penalty after they were found to have misappropriated participant funds from two foreign exchange binary options trading pools.  Caniff directed about $1.2 million to himself and directed about $1.1 million to his partner, Arie Bos.  Bos then concealed the misappropriation by reporting false profits to pool participants.  CFTC

September 2, 2022

Swapnil Rege, SwapStar Capital LLC, and Reema Rege have been ordered to pay $5 million in disgorgement and pre-judgment interest for engaging in fraudulent solicitation and misappropriation, including on Swapnil’s part, engaging in trading despite an existing bar for prior violations, and on Reema’s part, receiving illegally-obtained profits she was not entitled to.  The orders resulted from parallel but separate enforcement actions by the CFTC and SEC, and included a permanent trading and registration ban against Swapnil.  CFTC; SEC

July 15, 2022

A number of California- and Colorado-based people and their affiliated entities have been ordered to pay over $29 million in total in order to resolve multiple charges of violating CFTC regulations.  A federal judge had found California-based John D. Black, his associates Christopher Mancuso and Joseph Tufo, and his entities Financial Tree, Financial Solution Group, and New Money Advisors—as well as Colorado-based John P. Glenn and his law firm—liable for solicitation fraud in connection with binary options and forex transactions, registration violations, and other charges.  CFTC
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