Fraud in CFTC-Regulated Markets

September 19, 2023

Two whistleblowers who provided significant information and assistance to the CFTC has been awarded over $15 million for aiding in successful enforcement actions.  According to the agency, one whistleblower interpreted key evidence and helped identify new lines of inquiry, while the second whistleblower provided information that launched the investigation, provided a corroborating witness, and provided a declaration in support.  CFTC

September 7, 2023

In the highest civil monetary penalty ever ordered in a CFTC case, South Africa-based Mirror Trading International Proprietary Limited (MTI) and its founder and CEO, Cornelius Johannes Steynberg, have been ordered to pay $1.7 billion for defrauding over 23,000 U.S.-based retail foreign currency (forex) investors and failing to comply with commodity pool operator regulations.  MTI and Steynberg solicited Bitcoin from U.S. as well as foreign investors, purportedly trading off-exchange retail forex through an unregistered commodity pool, when in fact they were enriching themselves through a multilevel marketing scheme.  CFTC

August 29, 2023

Goldman Sachs & Co. has been ordered to pay $5.5 million to settle CFTC charges of violating the cease-and-desist provision of a previous order.  The 2019 order had involved a failure of Goldman’s hardware to record calls to its trading and sales desk for 20 calendar days in 2014.  The present order covers two additional failures involving Goldman’s use of two third-party vendors to record and retain audio calls.  During the early days of the pandemic, increased usage led to increased failures of the vendors’ hardware and software, which in turn led to additional failures to fully record and retain thousands of calls per CFTC recordkeeping requirements.  CFTC

August 8, 2023

Registered futures commission merchant Wedbush Securities Inc. has been ordered to pay $6 million for its failure to maintain, preserve, and produce communications relating to the company’s business as a CFTC registrant.  From about 2018 onward, the company used unapproved channels, such as personal texts, for internal and external communications, but failed to preserve them per recordkeeping requirements.  CFTC

August 8, 2023

BNP Paribas, Société Générale, Wells Fargo, and Bank of Montreal have been ordered to pay a combined $260 million for violating CFTC rules around recordkeeping and supervision.  Separately, two of those institutions, BNP Paribas and Wells Fargo, along with BMO Capital Markets Corp., Houlihan Lokey Capital, Inc., Mizuho Securities USA LLC, Moelis & Company LLC, SMBC Nikko Securities America, Inc., and Wedbush Securities Inc., have agreed to pay a combined $289 million for violating similar SEC rules.  The financial institutions were found to have failed to maintain, preserve, or produce communications sent via unapproved channels, such as personal texts.  With this enforcement action, the CFTC has recovered over $1 billion from actions against 18 financial institutions for similar charges, while the SEC has recovered over $1.5 billion from actions against 30 financial institutions.  CFTC, SEC

July 5, 2023

The operators of four feeder funds who failed to register with the CFTC and violated commodity pool regulations have been ordered to pay over $10 million cumulatively.  Hemraj Singh and King Royalty, LLC were ordered to pay about $7 million in restitution and civil monetary penalties, while Surujpal Sahdeo and SR&B Investment Enterprises, Inc., Randy Rosseau and Bull Run Advantage, LLC, and Daniel Cologero and Green Knight Investments, LLC were each ordered to pay under $1 million.  In addition to registration violations, the individuals and their companies collected almost $58 million from investors but used less than $2.5 million for their intended purpose of forex trading, while issuing false statements to investors showing only profits and no losses.  CFTC

July 3, 2023

Argent Asset Group LLC, First State Depository Company, LLC, and owner Robert Higgins have been ordered to pay a total of $146 million for making false representations to prospective precious metals investors and misappropriating tens of millions of dollars.  Through a fraudulent silver leasing program called the Maximus Program that promised guaranteed monthly lease payments, the defendants convinced some 200 unsuspecting customers into storing their assets with Argent.  Unbeknownst to customers, however, the defendants failed to adequately insure those assets despite making representations about coverage, and misappropriated client assets.  CFTC

June 28, 2023

Michael Ackerman of Ohio has been banned from participating in CFTC-regulated markets and ordered to pay $27 million in restitution as well as $27 million in civil monetary penalties for operating a digital asset fraud scheme.  He was also ordered to pay $31 million in restitution and serve 5 years of probation and 1 year of home confinement in a related criminal proceeding.  According to the CFTC, Ackerman solicited funds from more than 150 individuals and entities under the guise of using the funds to invest in digital commodity assets.  He was ultimately able to raise at least $33 million, but misappropriated all but $10 million for his personal use.  CFTC