March 14, 2012
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a federal court action in the Southern District of New York charging Joseph F. Welsh III, of Northport, N.Y., with attempted manipulation of the prices of palladium and platinum futures contracts, including the settlement prices, traded on the New York Mercantile Exchange (NYMEX). The CFTC complaint alleges that Welsh engaged in this conduct from at least June 2006 through May 2008 and specifically on at least 12 separate occasions.
The complaint charges Welsh with directly attempting to manipulate the palladium and platinum futures prices and with aiding and abetting the attempted manipulations of Christopher L. Pia, a former portfolio manager of Moore Capital Management, LLC, a CFTC registrant.
According to the complaint, while working as a broker at MF Global Inc., Welsh employed a manipulative scheme commonly known as “banging the close.”
Welsh allegedly routinely received market-on-close orders to buy palladium and platinum futures contracts from Pia, either directly or through a clerk, and also allegedly understood that Pia wanted to buy at high prices. To accomplish that, Welsh intentionally devised and implemented a trading strategy to attempt to maximize the price impact through trading during the two-minute closing periods of the palladium and platinum futures contracts markets (Closing Periods), the complaint charges.
The CFTC complaint also states that to push prices higher, Welsh routinely withheld entering the market-on-close buy orders until only a few seconds remained in the Closing Periods and thereby caused the orders to be executed within seconds of the close of trading.
The CFTC seeks civil monetary penalties, trading and registration bans and a permanent injunction against further violations of the federal commodities laws, as charged.
The CFTC settled related actions against Moore Capital Management LLC’s successor, Moore Capital Management, LP (Moore), and its affiliates and against Pia. On April 29, 2010, the CFTC issued an order filing and settling charges of attempted manipulation and failure to supervise against Moore and its affiliates. The CFTC’s order imposed a $25 million civil monetary penalty, restricted Moore’s market-on-close trading in the palladium and platinum futures and options markets for two years and restricted Moore’s registration for three years (see CFTC Press Release 5815-10).
On July 25, 2011, the CFTC issued an order filing and settling charges of attempted manipulation against Pia. The CFTC order required Pia, among other things, to pay a $1 million civil monetary penalty and permanently bans him from trading during the closing periods for all CFTC-regulated products and permanently bans him from trading CFTC regulated products in palladium and platinum (see CFTC News Release 6079-11).
The CFTC thanks the CME Group, the parent company of the NYMEX, for its assistance.
CFTC Division of Enforcement staff responsible for this case are Melanie Bates, Kara Mucha, James A. Garcia, August A. Imholtz III, Kassra Goudarzi, Jeremy Cusimano, Janine Gargiulo, Stephen Obie, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.
Last Updated: March 14, 2012