Release:#3916-96 (Docket# 92-21)
For Release: June 11, 1996
CFTC ADMINISTRATIVE LAW JUDGE FINDS THAT SOLOMON MAYER COMMITTED FRAUD BY BUCKETING CUSTOMER ORDERS ON THE NYMEX OVER A TWO-YEAR PERIOD; FINES TOTALING $525,000 LEVIED IN THE CASE
The Initial Decision Stems from a 23-count Complaint Filed by the CFTC in 1992
WASHINGTON - The Commodity Futures Trading Commission (CFTC) announced today that on May 15, 1996, the Honorable George Painter, CFTC Administrative Law Judge (ALJ), entered an Initial Decision finding that Solomon Mayer violated the anti-fraud provisions of the Commodity Exchange Act (CEA) by bucketing customer orders on the New York Mercantile Exchange (NYMEX) over two years, from 1987 though 1989. (In the Matter of Solomon Mayer, et al., CFTC Docket No. 92-21.)
The ALJ found that Solomon Mayer and Barry Mayer violated the CEA's trade practice provisions when they engaged in extensive noncompetitive trading on the NYMEX during the same period. SHB Commodities, Inc., a futures commission merchant, and Maye Commodities Corp. were held liable for the Mayers' violative trading activity. The ALJ found that Steven Gelbstein, a NYMEX floor trader, had accommodated Solomon Mayer's indirect bucketing of customer orders, in violation of the trade practice provisions of the CEA.
Furthermore, the ALJ's order revoked the commodity registrations of Solomon Mayer, Barry Mayer, and SHB and imposed a five-year commodity futures trading ban on each of them. In addition, the court assessed a civil monetary penalty in the amount of $200,000 on Solomon Mayer, and a $100,000 civil monetary penalty each on Barry Mayer, SHB, and Maye Commodities. Finally, Gelbstein is prohibited by the ALJ's order from trading for a period of 30 days and must pay a civil monetary penalty in the amount of $25,000. Each of the respondents is subject to a cease and desist order.
The matter arose from a 23-count complaint filed by the CFTC on April 24, 1992 (See CFTC News Release #3491-92, April 24, 1992). The CFTC complaint alleged that the respondents violated the CEA by, among other things:
bucketing customer orders; and
engaging in noncompetitively executed wash sales and fictitious trades.
In reaching its decision, the ALJ found that Solomon Mayer, Barry Mayer and SHB "abused their market trading privileges by deliberately and repeatedly cheating and defrauding customers and impairing the integrity of the market." The ALJ concluded that there was undoubtedly a nexus between the respondents' wrongdoing and the integrity of the futures market.
In the discussion, the ALJ opined that dual trading, which permits floor brokers to trade for their personal accounts as well as for customers, "mocks the notion of an open and competitive market, and virtually invites the abuses charged and proven in the case at hand." The ALJ also noted that the deliberate failure of Solomon Mayer, Barry Mayer, and Gelbstein to retain their trading cards constitutes a significant audit trail irregularity from which adverse inferences could be drawn.
Finding that the evidence presented failed to establish that Isaac Mayer acted in a capacity that required him to be registered with the CFTC, the ALJ dismissed the allegations in this regard against him. The CFTC's complaint charged Isaac Mayer with accepting customer orders on behalf of SHB without being registered with the CFTC, among other things.
Solomon Mayer has been registered with the CFTC as a floor broker since 1982. Barry Mayer and Halper have been registered as floor brokers since 1983. Gelbstein, a member of the NYMEX, was neither registered nor required to be registered with the CFTC during the relevant time period. SHB is registered as a futures commission merchant and is a member of the NYMEX. Maye Commodities was formerly a NYMEX clearing member.
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