Fraud in CFTC-Regulated Markets

July 19, 2018

A federal court in Utah has ordered an Estonian currency dealing company, Tallinex, to pay $10.2M in restitution and an additional $681K in fines for operating as an unregistered foreign exchange dealer and soliciting US customers. The CFTC also alleged that Tallinex defrauded its customers by making false or misleading representations about customer funds being protected in case of the company’s collapse. A Nevada-based broker, General Trader Fulfillment, that introduced American customers to Tallinex was also ordered to pay an $85k civil penalty. CFTC

July 19, 2018

A federal court in Washington, DC has ordered two Irish companies, Intrade the Prediction Market Limited and Trade Exchange Network, to pay $3M in penalties relating to the two companies permitting US customers to trade over 5,000 binary options on off-exchange options platforms, as outlawed by the CFTC. Trade Exchange Network was also in violation of a 2005 cease and desist order issued by the CFTC. CFTC

July 16, 2018

The CFTC has announced its first whistleblower award to a foreign whistleblower. The award totals over $70K, but the investigation that resulted in the award is yet-to-be revealed. This is the second award made under the CFTC’s new whistleblower rules, after the largest award in CFTC history, paid on July 12, 2018. CFTC

July 12, 2018

The CFTC announced an award of approximately $30 million to a whistleblower who voluntarily provided key original information that led to a successful enforcement action. The award is the largest award made by the CFTC’s Whistleblower Program to date and is the fifth award made by the program. Previously, the highest award amount paid to a CFTC whistleblower was in March 2016 of more than $10 million (see CFTC Press Release 7351-16, CFTC Announces Whistleblower Award of More Than $10 Million). CFTC

July 12, 2018

The CFTC issued an Order filing and settling charges against Lansing Trade Group, LLC (Lansing), a commodity merchandising firm with headquarters in Overland Park, Kansas, for the attempted manipulation of the price of certain wheat futures and options contracts that were traded on the Chicago Board of Trade (CBOT) and for aiding and abetting the attempted manipulation of the cash price for yellow corn from Columbus, Ohio (Columbus Corn). The CFTC Order requires Lansing to pay a $3.4 million civil monetary penalty, to undertake remedial measures to implement and strengthen its internal controls and procedures relating to compliance with the anti-manipulation provisions of the Commodity Exchange Act (CEA) and CFTC Regulations, and to cease and desist from further violations of the CEA and CFTC Regulations, as charged. CFTC

July 9, 2018

The CFTC announced Dillon Michael Dean and The Entrepreneurs Headquarters Limited (TEH) were ordered to pay over $1.9 million in civil monetary penalties and restitution for defrauding their customers. Dean and TEH solicited at least $499,264.04 worth of Bitcoin from 127 customers by falsely promising to convert the Bitcoin into fiat currency that would be invested in a pooled investment vehicle for trading commodity interests. At least 120 customers suffered total losses of $432,184.79 as a result of Defendants’ fraud. CFTC

July 2, 2018

The CFTC filed a civil enforcement action in the U.S. District Court for the Eastern District of New York, charging Harris Bruce Landgarten of Old Brookville, New York, with defrauding participants in a commodity pool that he operated, the Tradeanedge Members Fund (TMF). The CFTC Complaint also charges Landgarten with providing his pool participants false account statements and with commingling pool funds with non-pool funds. Further, Landgarten was also charged with one count of obstructing the CFTC’s investigation related to Landgarten’s communications with one of his pool participants, who was a potential witness, while the CFTC’s investigation that resulted in the filing of this enforcement action was pending. CFTC

June 28, 2018

The CFTC announced that an Order of Summary Judgment was entered against Mirko (Mick) Schacke of Brentwood, California, and a Default Judgment against Schacke’s company, TradeMasters USA, LLC of Las Vegas, Nevada. The Order, entered on June 22, 2018, amends a previous order entered on September 13, 2017, and finds that the Defendants committed fraud in their solicitations of futures trading software customers, failed to register with the CFTC and failed to provide required disclosures to investors. The Court’s Order also requires Schacke and TradeMasters, jointly and severally, to pay disgorgement of $168,626 to defrauded customers and a $505,878 civil monetary penalty. CFTC

June 18, 2018

The CFTC has ordered JPMorgan Chase to pay $65M as a penalty for attempted manipulation of the USD ISDAFIX benchmark swap rate. The CFTC found that between January 2012 and January 2017, the bank made false reports in an attempt to manipulate the USD International Swaps and Derivatives Association Fix (ISDAFIX), a benchmark in a range of interest rate products, to benefit its own positions. Banks are supposed to accurately report their relevant benchmark every day at 11AM. According to the CFTC, JPMorgan would make bids, offers, and execute transactions immediately before 11AM to manipulate what rate was reported. CFTC