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CFTC Enforcement Actions

The Commodity Futures Trading Commission (CFTC) is the United States agency with primary responsibility for enforcing the Commodity Exchange Act (CEA) and regulating commodity futures and related markets. Whistleblowers with knowledge of violations of laws and regulations enforced by the CFTC can submit a claim under the CFTC Whistleblower Reward Program, and may be eligible to receive a monetary reward and protection against retaliation by employers.

Below are summaries of recent CFTC settlements or successful enforcement actions. If you believe you have information about fraud which could give rise to a CFTC enforcement action and claim under the CFTC Whistleblower Reward Program, please contact us to speak with one of our experienced whistleblower attorneys.

February 21, 2020

Husam Tayeh of Illinois and his Nevada corporations, Dinar Corps., Inc. and My Monex, Inc., have agreed to pay the CFTC more than $22.6 million in disgorgement and civil monetary penalties after being found liable for violations of the Commodity Exchange Act arising from defendants’ alleged registration violations, misappropriation of investor funds, and fraudulent solicitation of customers to engage in financed retail forex transactions involving Iraqi Dinar and Vietnamese Dong.  To settle a related criminal action, Tayeh has been sentenced to 1 year in prison, ordered to forfeit more than $8 million, and ordered to pay more than $150,000 in restitution to victims.  CFTC

January 27, 2020

Catalyst Capital Advisors LLC and its CEO Jerry Szilagyi will pay more than $10 million -- $8.9 million in disgorgement and 1.6 million in civil monetary penalties -- to resolve claims that they failed to adequately supervise employees including the portfolio manager of Catalyst's Hedged Futures Strategy Fund, Edward Walczak, who was separately charged.   Catalyst and Walczak made materially misleading statements about the risk management strategies employed by the fund, including false statements that stop-loss measures and risk monitoring were in place.  The misrepresentations led investors and investment advisors to believe that the fund was a safer investment than it actually was. CFTC, SEC

January 21, 2020

Australian proprietary trading firm Propex Derivatives Pty Ltd has been ordered to pay $1 million and submit to a deferred prosecution agreement after a former trader, Jiongsheng (Jim) Zhao, was found to have engaged in spoofing on the Chicago Mercantile Exchange E-mini S&P 500 futures market.  His actions caused about $464,300 in market losses over the course of the five year scheme.  CFTC; DOJ

January 10, 2020

Richard Carter of Illinois has been ordered to pay $2.5 million for his role in a $1.76 million commodity pool fraud operated by Blue Guru, LLC.  According to the CFTC, from 2014 to 2018, Carter misrepresented the profitability of the commodity pool to current and prospective customers, while misappropriating customer funds, ignoring customer requests to withdraw, and lying to customers about disbursement issues.  Carter's co-defendant, Mark Slobodnik, was previously ordered to pay about $400,000, while Blue Guru was ordered to pay $7 million.  CFTC

December 19, 2019

The CFTC will pay a $1 million award to an anonymous whistleblower.  The CFTC stated that the whistleblower first provided the information through their employer's internal compliance program to another regulator, and subsequently provided the information directly to the CFTC.  Furthermore, the CFTC stated that the whistleblower was eligible for the award even though they did not identify the exact wrongdoing ultimately charged by the CFTC, because the whistleblower's information led the CFTC directly to evidence in support of the CFTC's claims.  CFTC

November 22, 2019

BGC Financial, L.P., a futures industry voice broker and registered futures commission merchant, has agreed to pay a $3 million civil monetary penalty to resolve CFTC charges that the company did not have an adequate supervisory system and failed to adequately perform its supervisory duties, including with respect to its traditional and block trading futures brokerage businesses. In addition, BGC violated recordkeeping, reporting, and other obligations, and failed to inform the CFTC of investigations by other regulatory entities.  CFTC

November 8, 2019

Wells Fargo Bank, N.A. will pay $14.475 million -- a $10 million penalty, and $4.475 million in restitution -- to resolve CFTC charges related to the bank's actions in a single 2014 FX forward contract trade valued at approximately $4 billion.  The contract required Wells Fargo to calculate the price based on a weighted average spot rate on the relevant day.  However, Wells Fargo had no system in place to accurately determine such a rate, but rather that inform the counterparty of that fact, Wells Fargo simply picked a rate it believed was in the range and provided the counterparty with a false spreadsheet that purported to calculate the rate but that did not, in fact, reflect relevant trades.  CFTC

November 7, 2019

Tower Research Capital, LLC, a proprietary trading firm, has been ordered to pay a record $67.4 million for engaging in a manipulative and deceptive spoofing scheme from 2012 to 2013.  The Commission found that when Tower traders had genuine orders on one side of the market, they would also place orders on the other side that they intended to cancel before execution, intending to create a false impression of supply and demand to induce other market participants to trade against their genuine orders. The judgment for over $32.6 million in restitution, $10.5 million in disgorgement, and $24.4 million in civil monetary penalty is reportedly the largest ever ordered in a spoofing case. Tower also entered into a deferred prosecution agreement in a settlement with DOJ, crediting their monetary settlement with the CFTC and imposing compliance obligations. CFTC; DOJ

October 28, 2019

Precious metals traders Omega Knight 2, LLC and Aviv Hen have been ordered to pay more than $15 million for engaging in fraudulent and illegal transactions and failing to register as a futures commission merchant with the CFTC.  Despite not being authorized to accept customer funds, Omega Knight allegedly made false statements to potential customers in order to obtain some $5.5 million from at least 90 customers, much of which was misappropriated to pay company bills, personal expenses, and prior customers.  A third defendant, Erez Hen, has been ordered to pay $350,000CFTC
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