June 7, 2012
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against Open E Cry, LLC (OEC), a registered futures commission merchant (FCM), for failing to diligently supervise the handling of its customer accounts. OEC has offices in Powell, Ohio, and Chicago, Ill.
The CFTC order requires OEC to pay a $250,000 civil monetary penalty and to cease and desist from further violations of CFTC regulation 166.3, which requires diligent supervision of customer accounts.
The CFTC order finds that for a period of months prior to June 2010, OEC failed to detect and correct a flaw in software it offered its customers for trading futures contracts that miscalculated the customers’ intraday profits and losses from trading the Russian ruble futures contract. As a result of the flaw, the order finds that the software that OEC offered its customers calculated profits and losses resulting from trades in the ruble contract at only 10 percent of actual amounts. OEC was unaware of the flaw, according to the order.
Also, according to the order, over a period of several hours in June 2010, a Russian national, Marat Yunusov, exploited the ruble calculation error and OEC’s supervision failures. Yunusov engaged in a fraudulent prearranged trading scheme using his OEC account in which he traded more than 20,000 ruble contracts through 372 individual trades, as well as an additional 70,000 E-micro British pound futures contracts with an account that he controlled at another FCM, the order finds. Yunusov’s ruble trading generated an actual loss of approximately $9 million in his OEC account, which roughly matched the ruble profits in the account he controlled at the other FCM, the order finds. As a result of the flaw, however, OEC’s systems inaccurately reflected a ruble loss of only $900,000 rather than $9 million.
The order also finds that as part of the scheme, Yunusov engaged in prearranged trading in British pound futures, which resulted in a gain to Yunusov in his OEC account of more than $900,000. As a result of the flaw, it appeared to OEC that Yunusov’s net ruble/pound trading at OEC was slightly profitable, when in fact Yunusov’s true net results for his ruble and pound trading that day showed a significant loss, according to the order.
OEC also failed to implement adequate alert systems to detect suspicious trading activity, such as the trading of extremely large quantities of futures contracts, and thus failed to detect and stop Yunusov’s trading, according to the order.
The CFTC thanks the CME Group for its assistance.
CFTC Division of Enforcement staff members responsible for this matter are Theodore Z. Polley III, Melissa Glasbrenner, William P. Janulis, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
Last Updated: June 7, 2012