For Release: October 21, 2009
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on October 16, 2009, the U.S. Court of Appeals for the Second Circuit affirmed the CFTC’s November 5, 2008, decision finding that Anthony J. DiPlacido (DiPlacido) manipulated settlement prices for electricity futures contracts on the New York Mercantile Exchange (NYMEX). The Second Circuit ruling also upheld the Commission’s imposition of a cease and desist order, a registration revocation and 20-year prohibition on DiPlacido’s trading on or subject to the rules of any registered entity. In addition, the Second Circuit modified the CFTC’s civil monetary penalty, reducing it from $1 million to $680,000.
(DiPlacido was charged by the CFTC in a complaint filed on August 21, 2001; see CFTC Press Release 4555-01, August 21, 2001.)
In a November 5, 2008, Opinion, the CFTC upheld the CFTC Administrative Law Judge’s (ALJ’s) liability determinations on four manipulation charges and sustained the ALJ’s other liability findings. The CFTC increased the $500,000 civil monetary penalty to $1 million and affirmed the ALJ’s remaining sanctions.
The CFTC’s Opinion explains why DiPlacido was liable for manipulating and attempting to manipulate the settlement prices of the PV futures contract for the nearby delivery month on April 24, May 22, and July 27, 1998, and the COB futures contract settlement price on July 27, 1998. The Opinion also explains why DiPlacido’s July 27, after-hours, non-competitive trade violated federal commodity laws. The CFTC found that DiPlacido violated federal commodity laws by falsely recording and reporting the July 27, non-competitively determined price. Lastly, the CFTC held that DiPlacido failed to promptly produce subpoenaed trading records.
On appeal to the Second Circuit, DiPlacido argued that (1) the decision violated due process because he lacked notice of the theory of manipulation under which he was found liable, (2) the applied theory of manipulation was erroneous as a matter of law, (3) the weight of the evidence did not support a finding of liability, (4) the ALJ made improper evidentiary rulings and exhibited bias and (5) the sanctions imposed were excessive. With limited exceptions, the Second Circuit rejected these arguments. While the Second Circuit found that the CFTC erred by finding DiPlacido liable both for the substantive offense of manipulation and for aiding and abetting, where the underlying conduct was the same, and accordingly reduced the civil monetary penalty by $320,000, the court otherwise affirmed the Commission’s decision.
Last Updated: October 21, 2009