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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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February 21, 2020

Husam Tayeh of Illinois and his Nevada corporations, Dinar Corps., Inc. and My Monex, Inc., have agreed to pay the CFTC more than $22.6 million in disgorgement and civil monetary penalties after being found liable for violations of the Commodity Exchange Act arising from defendants’ alleged registration violations, misappropriation of investor funds, and fraudulent solicitation of customers to engage in financed retail forex transactions involving Iraqi Dinar and Vietnamese Dong.  To settle a related criminal action, Tayeh has been sentenced to 1 year in prison, ordered to forfeit more than $8 million, and ordered to pay more than $150,000 in restitution to victims.  CFTC

January 27, 2020

Catalyst Capital Advisors LLC and its CEO Jerry Szilagyi will pay more than $10 million -- $8.9 million in disgorgement and 1.6 million in civil monetary penalties -- to resolve claims that they failed to adequately supervise employees including the portfolio manager of Catalyst's Hedged Futures Strategy Fund, Edward Walczak, who was separately charged.   Catalyst and Walczak made materially misleading statements about the risk management strategies employed by the fund, including false statements that stop-loss measures and risk monitoring were in place.  The misrepresentations led investors and investment advisors to believe that the fund was a safer investment than it actually was. CFTC, SEC

January 21, 2020

Australian proprietary trading firm Propex Derivatives Pty Ltd has been ordered to pay $1 million and submit to a deferred prosecution agreement after a former trader, Jiongsheng (Jim) Zhao, was found to have engaged in spoofing on the Chicago Mercantile Exchange E-mini S&P 500 futures market.  His actions caused about $464,300 in market losses over the course of the five year scheme.  CFTC; DOJ

January 10, 2020

Richard Carter of Illinois has been ordered to pay $2.5 million for his role in a $1.76 million commodity pool fraud operated by Blue Guru, LLC.  According to the CFTC, from 2014 to 2018, Carter misrepresented the profitability of the commodity pool to current and prospective customers, while misappropriating customer funds, ignoring customer requests to withdraw, and lying to customers about disbursement issues.  Carter's co-defendant, Mark Slobodnik, was previously ordered to pay about $400,000, while Blue Guru was ordered to pay $7 million.  CFTC

December 19, 2019

The CFTC will pay a $1 million award to an anonymous whistleblower.  The CFTC stated that the whistleblower first provided the information through their employer's internal compliance program to another regulator, and subsequently provided the information directly to the CFTC.  Furthermore, the CFTC stated that the whistleblower was eligible for the award even though they did not identify the exact wrongdoing ultimately charged by the CFTC, because the whistleblower's information led the CFTC directly to evidence in support of the CFTC's claims.  CFTC

November 22, 2019

BGC Financial, L.P., a futures industry voice broker and registered futures commission merchant, has agreed to pay a $3 million civil monetary penalty to resolve CFTC charges that the company did not have an adequate supervisory system and failed to adequately perform its supervisory duties, including with respect to its traditional and block trading futures brokerage businesses. In addition, BGC violated recordkeeping, reporting, and other obligations, and failed to inform the CFTC of investigations by other regulatory entities.  CFTC

CFTC Whistleblower Program Annual Report Shows Program Open for Business, yet Challenges Persist

Posted  11/15/19
Screenshot of CFTC Whistleblower Program web page
Fifteen million dollars is how much the United States Commodity Futures Trading Commission’s (CFTC) Whistleblower Program paid whistleblowers in FY 2019 according to the agency’s annual report to Congress.  This amount includes:
  • $7 million to one individual whistleblower;
  • Over $2 million to a non-insider whistleblower who provided independent analysis of market data; and,
  • Close to $1.5 million to a...

November 8, 2019

Wells Fargo Bank, N.A. will pay $14.475 million -- a $10 million penalty, and $4.475 million in restitution -- to resolve CFTC charges related to the bank's actions in a single 2014 FX forward contract trade valued at approximately $4 billion.  The contract required Wells Fargo to calculate the price based on a weighted average spot rate on the relevant day.  However, Wells Fargo had no system in place to accurately determine such a rate, but rather that inform the counterparty of that fact, Wells Fargo simply picked a rate it believed was in the range and provided the counterparty with a false spreadsheet that purported to calculate the rate but that did not, in fact, reflect relevant trades.  CFTC
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