Fraud in CFTC-Regulated Markets

June 27, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Huafu HK Co. Ltd. (Huafu), a corporation based in Hong Kong, for failing to file CFTC Form 304 reports, reporting its call cotton purchases and sales when it held or controlled at least 100 cotton futures positions. The CFTC previously issued a market Advisory reminding cotton market participants wherever they are located of their ongoing obligation to comply in a timely manner with applicable reporting obligations (see CFTC Staff Advisory No. 13-14, Obligation of Reportable Market Participants to File CFTC Form 304 Reports for Call Cotton in a Timely Manner as Required by Commission Regulation 19.02, May 8, 2013). The CFTC Order requires Huafu to pay a $225,000 civil monetary penalty and prohibits it from committing future violations of CFTC Regulation 19.02, as charged. CFTC

June 26, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York entered an Opinion and Order (Order) against Defendants Gary Creagh and Wall Street Pirate Management, LLC (Wall Street Pirate), both of New York, New York. The Order, entered on May 10, 2017, permanently prohibits the Defendants from registering with the CFTC in any capacity and engaging in any commodity interest trading, and it requires Defendants to pay a $125,000 civil monetary penalty. Also, the court entered a supplemental Order on June 16, 2017, that permanently bans Defendants from trading for themselves or on behalf of any other person or entity. CFTC

June 21, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order filing and simultaneously settling charges against Respondents McVean Trading & Investments, LLC (MTI), a Memphis-based Futures Commission Merchant (FCM), its Chairman and CEO, Charles Dow McVean, Sr. (McVean), and President, Michael J. Wharton (Wharton), and long-time MTI consultant Samuel C. Gilmore (Gilmore).  The Order finds that, by secretly using cattle feedyards as straw purchasers for hundreds of long live cattle futures contracts — which at some points more than doubled CME spot month position limits — McVean and Wharton intentionally or recklessly used a manipulative or deceptive device to inject false information into the market, which had the potential to affect the live cattle futures market.  By using these straw purchasers, McVean and Wharton were able to control substantial portions of the market without disclosing that control, which caused other market participants, including live cattle traders with open short positions, to see wider market interest, participation, and fragmentation on the long side of the market than actually existed.  James McDonald, the CFTC’s Director of Enforcement, said: “For markets to have integrity, market participants must be able to trust that the markets operate free of manipulative or deceptive conduct.  The Commission will always act to address those threats to the markets it regulates.  That includes cases like this one, where market participants try to game the markets by injecting false information, which distorts the view of that market seen by other participants.” The Order requires McVean to pay a civil monetary penalty of $2,000,000, MTI to pay a civil monetary penalty of $1,500,000, Wharton to pay a civil monetary penalty of $1,000,000, and Gilmore, who was charged as an aider and abettor of McVean’s position limits violations, to pay a civil monetary penalty of $500,000. CFTC

June 13, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Jose E. Martinez of the U.S. District Court for the Southern District of Florida entered a Consent Order against North American Asset Management, LLC (NAAM) of Fort Lauderdale, Florida, its owner and president Alexi Bethel of Miami, Florida, and its owner and managing director Steven Labadie of Lake Worth, Florida. The Order finds that NAAM, Bethel, and Labadie engaged in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis and requires them, jointly and severally, to pay restitution of $648,759.60 and a $977,430.47 civil monetary penalty. The Order also imposes permanent trading and registration bans against NAAM, Bethel, and Labadie and prohibits them from further violating the Commodity Exchange Act (CEA), as charged. The Order stems from a CFTC civil enforcement action filed against NAAM, Bethel, and Labadie on January 15, 2016, charging them with engaging in illegal, off-exchange precious metals transactions (see CFTC Complaint and Press Release 7331-16). CFTC

June 8, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced that on June 1, 2017, Judge James Robart of the U.S. District Court for the Western District of Washington entered a Statutory Restraining Order (SRO) against Sung Hong a/k/a Lawrence or Laurence Hong of Bellevue, Washington (Laurence Hong), Hyun Joo Hong a/k/a Grace Hong of either Bellevue or Clyde Hill, Washington (Grace Hong), and her company Pishon Holding LLC (Pishon) of Bellevue, Washington (collectively, the Defendants). The SRO, among other things, froze the Defendants’ assets and granted the CFTC the right to immediately inspect and copy the Defendants’ business records. CFTC

June 2, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against David Liew for engaging in numerous acts of spoofing, attempted manipulation, and, at times, manipulation of the gold and silver futures markets. Liew engaged in this unlawful conduct for more than two years while he was employed as a junior trader on the precious metals desk for a large financial institution (Financial Institution 1). The CFTC Order finds that Liew acted individually and in coordination with traders at Financial Institution 1 and with a trader at another large financial institution. In the Order, Liew admits the facts of his manipulation and spoofing activity and acknowledges that his conduct violated the Commodity Exchange Act (CEA) and Commission Regulations. The Order permanently bans Liew from trading commodity interests and requires him to comply with undertakings never to engage in other commodity-interest related activities, including seeking registration, acting in a capacity requiring registration, or acting as a principal, agent, officer or employee of any person registered, required to be registered or exempt from registration. CFTC

May 30, 2017

The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Cecilia M. Altonaga of the U.S. District Court for the Southern District of Florida entered a final Order of Default Judgment (Order) against Defendants Kelvin Burgos and his company K.B. Concepts Group, LLC d/b/a Apex Asset Advisors, LLC (K.B. Concepts) for engaging in illegal, off-exchange precious metals transactions. Burgos, a resident of Florida, was the owner and principal of K.B. Concepts, which operated its metals business under the name Apex Asset Advisors, LLC. The Court’s Order stems from a CFTC civil enforcement action filed against the Defendants on September 20, 2016 (see CFTC Complaint and Press Release 7448-16). The Court’s Order requires Burgos and K.B. Concepts to pay, jointly and severally, $121,591.10 in disgorgement and a $364,773.30 civil monetary penalty. The Order also imposes permanent trading, solicitation, and registration bans against Burgos and K.B. Concepts, and prohibits them from engaging in illegal, off-exchange precious metals transactions, as charged. CFTC

May 23, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Kenneth A. Marra of the U.S. District Court for the Southern District of Florida entered a Consent Order against Guardian Asset Group, LLC (Guardian) of West Palm Beach, Florida, and its owner and principal, Andrew Kurzbard, with a last-known address in Hacksneck, Virginia, finding that Guardian and Kurzbard engaged in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis. The Order requires Guardian and Kurzbard, jointly and severally, to pay restitution of $434,413.54 and a $651,620.31 civil monetary penalty. The Order also imposes permanent trading and registration bans against Guardian and Kurzbard and prohibits them from further violating the Commodity Exchange Act, as charged. The Order stems from a CFTC civil enforcement action filed against Guardian and Kurzbard on September 30, 2015, charging them with engaging in illegal, off-exchange precious metals transactions (see CFTC Complaint and Press Release 7257-15). CFTC

May 3, 2017

The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the District of Arizona against Cory Williams of Gilbert, Arizona, and his company, Williams Advisory Group (WAG) (collectively, Defendants), charging them with defrauding 40 investors out of at least $13 million in connection with a commodity pool they operated. The CFTC Complaint charges Defendants Williams and WAG with commodity futures fraud and Williams with commodity pool fraud and failure to register as a commodity pool operator. The Complaint also charges Williams with engaging in activities prohibited for a commodity pool operator, including commingling pool participant funds with Williams’ personal funds. The Complaint alleges that Williams’ victims included family members, friends, neighbors and members of his church and other related churches in and around Phoenix, Arizona. CFTC

May 2, 2017

The U.S. Commodity Futures Trading Commission (CFTC) filed an enforcement action in the U.S. District Court, Northern District of Illinois, charging Defendant, William H. Powderly IV (Powderly) of New Hope, Pennsylvania, with fraudulently soliciting at least $825,000 from at least four customers for purposes of trading commodity futures on their behalf in an account in Powderly’s name. The Complaint also charges Powderly with making and providing false and misleading account statements to his customers. In particular, the Complaint alleges that from at least January 2016 through October 2016, Powderly solicited customers and prospective customers by claiming that he and a university professor had developed a commodity futures trading program that generated exceptional hypothetical trading results and that “beta” testing of this system generated consistent gains without a single day of loss. The Complaint further alleges that when soliciting customers and prospective customers, Powderly failed to tell them that the actual commodity trading he conducted for his commodity account during that 10-month period was consistently unprofitable, sustaining losses every month during that time. Additionally, the Complaint alleges that Powderly created false account statements for his trading account and sent them to his customers in order to conceal his trading losses. CFTC