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Fraud in CFTC-Regulated Markets

This archive displays posts tagged as relevant to fraud in markets regulated by the Commodity Futures Trading Commission, the CFTC, or governed by the Commodity Exchange Act, the CEA. You may also be interested in the following pages:

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January 28, 2019

Jiongsheng (“Jim”) Zhao, of Sydney, Australia, a commodities trader at an Australian proprietary trading firm (Trading Firm A), pleaded guilty to spoofing in connection with his fraudulent and deceptive trading activity in the E-mini S&P 500 futures contracts market on the Chicago Mercantile Exchange (CME). Zhao admitted that from approximately July 2012 through March 2016, he placed thousands of orders for E-mini S&P 500 futures contracts on the CME that he intended to cancel before execution to artificially move the price of E-mini S&P 500 futures contracts in a direction that was favorable to Zhao to the detriment of other market participants. Trading Firm A kept a percentage of Zhao’s trading profits, ranging at various times from 20 percent to 50 percent. DOJ

Top Ten SEC and CFTC Recoveries of 2018

Posted  01/18/19
The SEC and CFTC were busy in 2018. In addition to its robust FCPA enforcement, the SEC recovered hundreds of millions of dollars from companies accused of defrauding investors, breaching fiduciary duties, and violating SEC rules. The SEC also awarded its largest-ever whistleblower awards in 2018. Likewise, the CFTC spent the last year cracking down on market manipulators, rooting out commodities fraud, and halting...

December 21, 2018

Lon Olen Friedrichsen of Alton, Iowa, has been ordered to pay $2.1 million following a CFTC complaint alleging that he improperly solicited customers to obtain access to their futures trading accounts by misrepresenting his registration and experience.  Friedrichsen then ran up substantial losses in the customer accounts, but created false statements to conceal those losses.  CFTC

December 21, 2018

Forex trading firm Wright Time Capital Group LLC and its principal, Michael S. Wright, have been ordered to pay approximately $1.6 million in connection with a CFTC complaint charging that they fraudulently solicited investments in a commodity pool for foreign exchange trading, misrepresented that pool participants’ funds would be used to engaged in forex trading, misappropriated pool participants’ funds, and created false records that misrepresented trading returns and account values. CFTC

December 21, 2018

Newport Private Capital LLC and its principal, Jonathan Hansen, have been ordered to pay a $315,000 penalty for a "cherry-picking" scheme by which NPC entered multiple orders for commodity interests, but only allocated the orders to specific customer accounts after they were executed.  The defendants then preferentially allocated the transactions that turned out to be profitable to accounts in the name of Hansen's spouse, and not to the accounts of other NPC customers.  CFTC

December 19, 2018

Following charges brought by the CFTC in 2016, Haena Park and companies affiliated with her, Phaetra Capital GP LLC, Phaetra Capital Management LP, and Argenta Group LLC, have been ordered to pay $23 million in restitution to defrauded investors in commodity pools operated by defendants.  Park made material misrepresentations and omissions concerning her trading expertise, and the defendants made and issued false documents to conceal their trading losses and misappropriations of investor funds, in addition to commingling funds and failing to operate the commodity pool as a separate legal entity.  CFTC

November 16, 2018

The CFTC and State of Utah have charged Rust Rare Coin, Inc. (RRC) and owner Gaylen Dean Rust for their roles in a precious metals Ponzi scheme. According to the DOJ press release, beginning in 2008 until only just recently, Rust fraudulently obtained over $170 million for RRC by lying to at least 200 investors in at least 17 states to get them to invest money in a silver pool. Investors were told the company's silver holdings amounted to between $77 to $80 million, and they stood to gain between 20-40% profit each year as a result of RRC’s buying and selling strategy. In reality, however, the defendants did not have nearly as much silver and were using investor contributions to pay other investors, as well as personal expenses. CFTC, UT AG

November 8, 2018

Commerzbank AG agreed to pay a $12 million civil fine and adopt compliance procedures to settle CFTC charges that it failed to supervise its Swap Dealer's activities and made misleading statements and material omissions to the CFTC concerning its Swap Dealer’s operations and compliance with the CEA and CFTC Regulations.  The CFTC found that Commerzbank failed to adopt any effective process for determining whether swap transactions with certain non-U.S. swap counterparties were subject to Dodd-Frank, failed to report swap transactions to swap data repositories, failed to submit Large Trader Reports, and and failed to execute certain swaps on swap execution facilities, all in violation of application rules and regulations.  CFTC

CFTC Whistleblower Program has a Banner Year, but Challenges Remain

Posted  11/6/18
Seventy-five million dollars. That’s how much the United States Commodity Futures Trading Commission’s (CFTC’s) Whistleblower Program paid five whistleblowers - including $30 million to one, the CFTC’s largest award to date-according to the agency’s annual report to Congress for 2018. Also, for the first time, the CFTC awarded a whistleblower living in a foreign country. Without a doubt, 2018 was a banner...

October 12, 2018

Former commodity traders Yuchun "Bruce" Mao, Kamaldeep Gandhi, and Krishna Mohan have been charged with commodities fraud and spoofing in a scheme that cost investors on the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) over $60 million in losses. Over the course of two years, the three allegedly placed thousands of orders and canceled them before execution in order to drive up demand. When defendant Gandhi moved onto another firm, he allegedly continued placing spoof orders. Along with defendant Mohan, Gandhi has agreed to plead guilty to the charges; no word yet on how Mao will plead. CFTC; DOJ; USAO SDTX
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