CFTC Orders, Collects Record Amounts in FY '15 Actions

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By Richard Hill

Nov. 6 — A record $3.144 billion in monetary penalties was ordered in fiscal year 2015 Commodity Futures Trading Commission enforcement cases, the agency said Nov. 6.

Of that amount, the agency collected $2.8 billion for the U.S. Treasury—another record. The amount is more than 12 times the agency's budget, the CFTC noted in a statement.

Including restitution and disgorgement of approximately $59 million, monetary sanctions came in at approximately $3.2 billion for the year ended Sept. 30. The number was just shy of the record $3.27 billion ordered in FY 2014.

The numbers were bolstered by the largest penalty in CFTC history—an $800 million settlement in April with Deutsche Bank AG. The settlement was part of a global resolution with the bank also involving the Justice Department and U.K. officials over its alleged role in rigging benchmark interest rates.

The CFTC filed 69 enforcement cases for the fiscal year, with a focus on manipulation, fraud and “spoofing”—bidding or offering on an order with the intent to cancel prior to execution. That was two more than the 67 new actions filed in FY 2014.

The CFTC highlighted a case against Navinder Singh Sarao and his company as one of the most important spoofing cases of the year. The U.K. man was arrested in April and charged with manipulating the “E-Mini” futures contract. The CFTC simultaneously filed a related civil case, saying Sarao's actions played a “significant factor” in the May 2010 “flash crash.” Sarao is scheduled to face an extradition hearing to the U.S. in February.

Kraft Allegation

Another significant manipulation case involved Kraft Foods Group Inc. In April, the CFTC alleged that Kraft and a related entity, Mondelz Global LLC, manipulated wheat futures and cash wheat prices, and also violated rules on position limits and noncompetitive trading. According to the CFTC, the defendants realized more than $5.4 million in illicit profits by purchasing—but never taking delivery—of more than $90 million in wheat futures and anticipating how the market would react to their enormous purchase.

Other cases involved trading options on the virtual currency bitcoin without proper registration, reporting violations, improper protection of customer assets, trade practice violations, illegal precious metals transactions, and making false statements to regulators. In the September bitcoin case, the CFTC for the first time said that it and other virtual currencies come under the definition of commodities and are regulated by the Commodity Exchange Act.

To contact the reporter on this story: Richard hill in Washington at rhill@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

The release with the data can be seen at http://www.cftc.gov/PressRoom/PressReleases/pr7274-15#PRBoxR1.