#4217-98 (CFTC Docket No.
For Release: December 22, 1998
CFTC FILES ENFORCEMENT ACTION ALLEGING FRAUD BY STEVEN G. SOULE OF ATLANTA, GEORGIA, AND AIDING AND ABETTING FRAUD BY KYLER F. LUNMAN II OF RUMSON, N.J. AND HOLD-TRADE, INC. a/k/a HOLD TRADE, LTD. OF RED BANK, N.J.
Complaint Charges that a Former Employee of Coastal Corporation Committed Commodity Fraud by Misappropriating Certain of Coastal's Profitable Energy Futures Transactions and Wrongfully Allocating Them to Other, Non-Coastal Accounts
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a three-count administrative complaint alleging that Steven G. Soule (Soule), a former employee of Coastal Corporation (Coastal) in its futures trading division, violated the anti-fraud provisions of the Commodity Exchange Act (CEA), specifically sections 4b(a)(i), (ii), and (iii), by engaging in a scheme in which energy futures trades made on behalf of Coastal were misappropriated and wrongfully allocated to accounts controlled by Kyler F. Lunman II (Lunman) and his company, Hold-Trade, Inc., a.k.a. Hold Trade, Ltd. (Hold Trade).
According to the Complaint, Soule, while employed at Coastal, was responsible for entering Coastal's large volume of energy futures orders to the floor of the New York Mercantile Exchange (NYMEX) on a daily basis and initiated fraudulent allocations based on his knowledge of Coastal's trading on particular days. Soule was assisted in carrying out the allegedly fraudulent allocations by a telephone clerk on the floor of the NYMEX who worked for Refined Energy Executions, Inc. and Refine Executions, Inc. (collectively, Refined). The Complaint alleges that Soule and the clerk ensured the successful completion of the wrongful allocations by creating doctored floor order tickets and entering into additional transactions to replace those transactions that were misappropriated.
Lunman and Hold Trade completed the scheme by providing the accounts into which the misappropriated Coastal trades were placed, monitoring the movement of Coastal's profitable trades into those accounts, and disbursing the ill-gotten gains among the scheme's participants, according to the Complaint. Lunman and Hold Trade are being charged with aiding and abetting the fraudulent allocation scheme pursuant to section 13(a) of the CEA. Hold Trade is also charged as a principal for the actions of its employee, Lunman, by operation of section 2(a)(1)(A)(iii) of the Act, and Lunman is further charged with liability for violations of section 4b as a controlling person of Hold Trade who knowingly induced Hold Trade's violations pursuant to section 13(b) of the CEA.
The CFTC's complaint against Soule, Lunman, and Hold Trade institutes a public administrative proceeding to determine if the allegations in the complaint are true and, if so, whether sanctions should be imposed. Possible sanctions include: an order directing the respondents to cease and desist from violating the relevant provisions of the Act and regulations; a permanent trading prohibition; civil monetary penalties not exceeding $100,000 for each violation; and restitution.