CFTC SETTLES CHARGES AGAINST FLORIDA TRADING FIRM AND TWO INDIVIDUALS RELATING TO ILLEGAL WASH TRADES
Hencorp Becstone Futures LC, Jorge Mattos, and Oscar Schaps Ordered to Pay Civil Penalties
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing and simultaneous settlement of charges under the Commodity Exchange Act (CEA) that Hencorp Becstone Futures LC (Hencorp) and Jorge Mattos, both of Miami, Florida, each knowingly participated in illegal wash trading on the Coffee, Sugar & Cocoa Exchange (CSCE), which, at the time, was a subsidiary of the New York Board of Trade. In addition, the CFTC found that Oscar Schaps, also of Miami, violated the CEA by failing to diligently supervise Mattos’ handling of customer orders. The CFTC issued an order imposing a civil penalty and other sanctions on each respondent.
The CFTC order, issued on December 22, 2004, finds that between May 2000 and July 2000, Mattos, an employee of Hencorp, on at least three occasions, used non-bona fide coffee exchange-of-futures-for-physical transactions (EFPs) to facilitate the transfer of at least $385,000 between foreign futures accounts that he knew were under common control and ownership. According to the order, none of the EFPs involved any actual exchange of physical coffee. Instead, according to the order, the sole purpose of the EFPs was to transfer money from one foreign entity’s futures account to the futures account of another foreign entity under common control and ownership.
The order finds that, because Mattos’ intention was to negate market risk and price competition, and thereby to avoid a bona fide market transaction, he violated the CEA's prohibition against participating in illegal wash sales. Further, the orders find that the transactions resulted in the reporting of non-bona fide prices, in addition to being illegal noncompetitive trades. Because Mattos undertook these actions within the scope of his employment at Hencorp, Hencorp is also liable for his violations, according to the order. Finally, the order finds that Schaps failed to diligently supervise Mattos’ handling of customer accounts. Schaps has been a principal of Hencorp from April 9, 1999, to the present, and a managing director of Hencorp from May 2000 to the present.
The order directs the respondents to cease and desist from further violations of the CEA, pay a total civil penalty of $50,000, and comply with specified undertakings. The order also bars Mattos from registration with the Commission for a period of five years. In consenting to the entry of the CFTC’s order, the respondents neither admitted nor denied the findings made in the order.
A copy of the CFTC order may be found at http://www.cftc.gov.
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