Fraud in CFTC-Regulated Markets

October 12, 2023

The CFTC has awarded more than $18 million to a whistleblower.  According to the agency, the whistleblower’s detailed information and significant assistance led to enforcement actions by the CFTC as well as another agency.  CFTC

September 29, 2023

Goldman Sachs & Co. LLC has been ordered to pay $3 million to settle charges of failing to maintain adequate supervisory systems and controls, in connection with a 2017 malfunction.  Additionally, Goldman allegedly omitted material information regarding the malfunction when responding to a CFTC request for information on how customer orders were executed.  CFTC

September 29, 2023

Goldman Sachs, J.P. Morgan, and Bank of America and Merrill Lynch have been ordered to pay $30 million, $15 million, and $8 million respectively in connection with a variety of swap dealer failures.  Goldman Sachs failed to diligently supervise a wide range of its swap dealer activities, some of them since 2013, and failed to accurately or timely report a significant portion of its swap data.  J.P. Morgan underreported or misreported over 40 million swap transactions.  Bank of America and Merrill Lynch underreported or misreported almost 4 million swap transactions.  CFTC

September 29, 2023

Interactive Brokers Corp., an introducing broker, and Interactive Brokers LLC, a futures commission merchant, has been ordered to pay $20 million to the CFTC and $35 million to the SEC to resolve charges of failing to maintain and preserve records.  The records included communications through unapproved channels, such as text and WhatsApp, which employees at all levels used and which the company failed to maintain and preserve.  The SEC also resolved charges against other firms for similar misconduct, including Robert W. Baird & Co. Inc. ($15 million); William Blair & Company LLC and William Blair Investment Management LLC ($10 million); Nuveen Securities LLC ($8.5 million); Fifth Third Securities Inc. ($8 million); and Perella Weinberg Partners LP, Tudor, Pickering, Holt & Co. Securities LLC, and Perella Weinberg Partners Capital Management LP ($2.5 million).  CFTC; SEC

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