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RELEASE: pr5733A-09

  • Release: 5733A-09
    For Release: October 16, 2009

    CFTC Enforcement Program Files 25% More Cases During Fiscal Year 2009 than in the Prior Fiscal Year

    Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today that its enforcement program filed 25% more cases in Fiscal Year (FY) 2009, which ended on September 30, 2009, than in the prior fiscal year. During FY 2009, the CFTC’s Division of Enforcement filed 50 enforcement actions involving manipulation, fraud and other unlawful conduct and was awarded more than $280 million in civil monetary penalties, restitution and disgorgement from respondents and defendants in CFTC enforcement actions. Over the past five years, the CFTC has filed a total of 238 enforcement actions and has been awarded more than $2 billion in sanctions.

    Overview of CFTC Enforcement Cases Filed

    Of the 50 new actions that were filed during FY 2009, 15 involved fraud in connection with pooled investments and 16 involved fraud against retail foreign currency customers.

    Manipulation, Attempted Manipulation & False Reporting

    1

    Other Energy Market Misconduct

    1

    Commodity Pools, Hedge Funds, Commodity Pool Operators and Commodity Trading Advisors

    15

    Commodity Trading Advisors, Managed Accounts and Trading Systems

    3

    Fraud By Futures Commission Merchants, Introducing Brokers and Their Associated Persons

    1

    Forex Fraud

    16

    Statutory Disqualification

    2

    Financial, Supervision, Compliance and Recordkeeping

    8

    Trade Practice

    3

    Fighting Fraud and Manipulation

    As part of the June 2008 reauthorization of the CFTC, Congress clarified the CFTC’s authority with respect to off-exchange, retail foreign currency (forex) fraud. Many of these frauds involve “Boiler rooms” (operations that use high-pressure sales tactics, usually including false or misleading information) and Ponzi schemes (in which the fraudsters return “profits” to their customers that in actuality were not the result of successful trading but came from either existing customers’ original investments or money invested by subsequent customers). The CFTC aggressively prosecuted these types of fraud. Of the 50 enforcement actions filed during FY 2009, 16 (32%) involved allegations of retail forex fraud.

    Fiscal Year

    Total Case Filings

    Forex Case Filings

    Forex Cases As a % Of Total Filings

    2006

    38

    6

    16%

    2007

    41

    6

    15%

    2008

    40

    1

    3%

    2009

    50

    16

    32%

    Furthermore, during FY 2009, the CFTC continued its focus on misconduct in agricultural markets. For example, during FY 2009, the CFTC brought an enforcement action against the dairy marketing cooperative Dairy Farmers of America, Inc., its former Chief Executive Officer Gary Hanman, and its former Chief Financial Officer Gerald Bos finding that they tried to manipulate the Class III milk futures contract and exceeding speculative position limits in that contract. In re Dairy Farmers of America, Inc., et al., CFTC Docket No. 09-02 (CFTC filed Dec. 16, 2008) (imposing sanctions, including a $12 million civil monetary penalty).

    Cooperative Investigation and Prosecution

    The CFTC Division of Enforcement greatly values cooperative efforts with federal and state criminal and civil enforcement authorities. During FY 2009, approximately 88% of the CFTC’s civil injunctive fraud cases involved related criminal investigations and, to date, more than 45% of those investigations have resulted in criminal indictments.

    The CFTC has also increased coordination and cooperation with the Securities and Exchange Commission (SEC). During the last fiscal year, more than 60% of the CFTC’s civil injunctive fraud cases involved cooperative investigation by CFTC and SEC staff and in almost 60% of these cooperative investigations, the SEC filed a related action arising from the same misconduct at issue in the CFTC action.

    The success of these cooperative efforts during FY 2009 is highlighted in the CFTC’s civil injunctive action against Stephen Walsh and Paul Greenwood, charging them with a $1.3 billion investment scheme that included misappropriation of at least $553 million from commodity pool participants in connection with entities Walsh and Greenwood owned and controlled, defendants Westridge Capital Management, Inc., WG Trading Investors, LP and WGIA, LLC. CFTC v. Walsh, et al., No. 09 CV 1749 (S.D.N.Y. filed Feb. 25, 2009). On the same day the CFTC filed its action, the office of the U.S. Attorney for the Southern District of New York filed a criminal complaint against Walsh and Greenwood, and the SEC filed a civil action against Walsh, Greenwood and others.

    CFTC Enforcement Program Continues to Provide Leadership

    The CFTC has taken the lead in strengthening cooperative enforcement bonds between and among foreign and domestic civil and criminal authorities. These efforts during FY 2009 included the following:

    • 2nd Annual CFTC Cooperative Enforcement Conference – On September 30, 2009, the CFTC hosted a cooperative enforcement conference that brought together top civil and criminal litigators and experts, including representatives from the U.S. Department of Justice, U.S. Attorney’s Offices from across the nation, the Federal Bureau of Investigation, the SEC and the Federal Energy Regulatory Commission. Among the issues tackled were: (1) how best to respond to the onslaught of Ponzi schemes and other major frauds and (2) how to deal with fraud and manipulation in the $600 trillion over-the-counter derivatives (OTC) market.
    • 3rd Annual International Commodity Market Manipulation Conference - On June 24-25, 2009, senior enforcement officials from 14 regulatory authorities around the world gathered for the CFTC’s third annual international manipulation enforcement conference. Co-chaired by the CFTC and the UK Financial Services Authority (UK FSA), the conference brought together international regulators to share their respective experiences and observations of market abuse trends with the goal of enhancing regulators’ ability to detect and deter misconduct affecting commodity prices locally and worldwide. Discussions covered a wide-range of topics including the scope of derivatives market abuse, market surveillance and abusive behavior involving futures, cash and OTC markets.

    Media Contacts
    Scott Schneider
    202-418-5080

    Dennis Holden
    202-418-5088

    Last Updated: August 28, 2012

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