Regulatory Violations

August 18, 2016

The CFTC filed a complaint in the Southern District of New York charging Deutsche Bank AG with multiple swap reporting violations, failing to supervise its employees responsible for swap data reporting, and violating a prior CFTC order.  CFTC

August 15 , 2016

The CFTC obtained a summary judgment order requiring Robert S. Leben and Amy L. Leben of Columbia, South Carolina, to pay over $10 million in penalties and restitution for misappropriating pool participant funds and failing to register as commodity pool operators, among other charges.  CFTC

August 12, 2016

The U.S. District Court for the Southern District of Florida ordered International Monetary Metals, Inc., a Florida corporation, and its controlling person, Martin Sommers to pay almost $10 million in disgorgement and a civil monetary penalty for engaging in illegal, off-exchange precious metals transactions and registration violations.  CFTC

August 12, 2016

Ralph Metters, formerly of Los Angeles, California, was ordered to pay $1 million in penalties and disgorgement in connection with operating an off-exchange foreign currency fraud scheme.  CFTC

August 4, 2016

Barclays Capital, Inc., a Connecticut corporation headquartered in New York City, agreed to pay $800,000 to resolve charges that it failed to diligently supervise the processing of exchange and clearing fees it charged customers for trading and clearing Chicago Mercantile Exchange, Inc. products.  CFTC

August 3, 2016

Jonathan A. Parker and QuantX Capital, LLC, both of Marietta, Georgia, were ordered to pay over $1 million in penalties and restitution for committing fraud and misappropriation in connection with operating a commodity pool that offered leveraged or margined off-exchange foreign currency transactions.  CFTC

July 12, 2016

Citigroup Global Markets will pay a $7 million penalty and admit wrongdoing to settle charges that a computer coding error caused the firm to provide the agency with incomplete “blue sheet” information about trades it executed.  According to the SEC’s order, the coding error occurred in the software that Citigroup used from May 1999 to April 2014 to process SEC requests for blue sheet data, including the time of trades, types of trades, volume traded, prices, and other customer identifying information.  Consequently, during that period, Citigroup omitted 26,810 securities transactions from its responses to more than 2,300 blue sheet requests.  After discovering the coding error, Citigroup failed to report the incident to the SEC or take any steps to produce the omitted data until nine months later.  SEC

June 23, 2016

Merrill Lynch will pay $415 million and admit wrongdoing to settle charges that it misused customer cash to generate profits for the firm and failed to safeguard customer securities from the claims of its creditors.  An SEC investigation found that Merrill Lynch violated the SEC’s Customer Protection Rule by misusing customer cash that rightfully should have been deposited in a reserve account.  Merrill Lynch engaged in complex options trades that lacked economic substance and artificially reduced the required deposit of customer cash in the reserve account.  The maneuver freed up billions of dollars per week from 2009 to 2012 that Merrill Lynch used to finance its own trading activities.  Had Merrill Lynch failed in the midst of these trades, the firms’ customers would have been exposed to a massive shortfall in the reserve account.  In addition, according to the SEC’s order, Merrill Lynch further violated the Customer Protection Rule by failing to adhere to requirements that fully-paid-for customer securities be held in lien-free accounts and shielded from claims by third parties should the firm collapse.  In addition to the Customer Protection Rule violations, Merrill Lynch violated Exchange Act 21F-17 by using language in severance agreements that operated to impede employees from voluntarily providing information to the SEC.  SEC

June 22, 2016

The SEC obtained an emergency court order to freeze the assets of Idris Dayo Mustapha, a UK resident charged with intruding into the online brokerage accounts of U.S. investors to make unauthorized stock trades that allowed him to profit on trades in his own account.  The SEC’s complaint alleges that in April and May of 2016, Mustapha hacked into numerous accounts of U.S. customers of broker-dealers in and outside the U.S, placed stock trades without the customers’ knowledge, and then traded in the same stocks through his brokerage account.  SEC

June 8, 2016

Ethiopia’s electric utility, Ethiopian Electric Power, will pay almost $6.5 million to settle charges that it violated U.S. securities laws by failing to register bonds it offered and sold to U.S. residents of Ethiopian descent.  According to the SEC’s order, EEP conducted an unregistered bond offering to help finance construction of a hydroelectric dam on the Abay River in Ethiopia.  EEP held a series of road shows in major cities across the U.S., marketed the bonds on the website of the U.S. Embassy of Ethiopia, and through radio and television advertising aimed at Ethiopians living in the U.S.  EEP raised approximately $5.8 million from more than 3,100 U.S. residents between 2011 and 2014 without ever registering the bond offering with the SEC.  SEC