August 30, 2010
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today filed and simultaneously settled fraud and unauthorized trading charges against former floor broker John Lee Neuman of Naperville, Ill. Neuman was registered with the CFTC as a floor broker from May 1993 until February 2008 and is currently not registered with the CFTC in any capacity.
On June 22, 2007, Neuman, a Chicago Board of Trade (CBOT) member and a trader in the corn options pit, engaged in unauthorized trading in the account of another corn options trader, according to the order. The order finds that Neuman ignored the account owner’s instructions to limit risk and made unauthorized purchases in the account of several thousand July 2007 corn futures contracts in a downward trending market. As a result, Neuman ended the trading day with a net long futures position of approximately 4,000 contracts and $8 million in margin calls, which he was unable to cover, according to the order.
The order also finds that Neuman attempted to hide his unauthorized trades from the account owner by misrepresenting the profits, losses and risks that the account was incurring. Also, Neuman altered trade data in a risk monitoring system used by the account owner to monitor Neuman’s trading and issued false statements to the account owner. Ultimately, as a result of Neuman’s conduct, the account owner suffered approximately $4 million in trading losses.
The order permanently prohibits Neuman from directly or indirectly trading on or subject to the rules of any registered entity, subjects him to a permanent CFTC registration ban and requires that he cease and desist from violating the anti-fraud provisions of the Commodity Exchange Act.
The CBOT previously brought an action against Neuman arising out of these facts. The CBOT action ordered Neuman to pay $4 million in restitution to the account owner. The CFTC did not seek a civil monetary penalty against Neuman in light of the CBOT’s action requiring restitution, according to the order.
The CFTC Division of Enforcement staff responsible for this action are Camille Arnold, Susan Gradman, Judith McCorkle, Scott Williamson, Rosemary Hollinger and Richard Wagner.
Last Updated: August 31, 2010