Protect the public and market participants through a robust
enforcement program.
FY 2012 INVESTMENT
Net Cost: $60.9 Million
Staffing: 202 FTE
The Commission is committed to prosecuting violations of the CEA and Commission regulations to protect market participants and promote market integrity. The Commission investigates and litigates cases that have the greatest impact, whether they are against some of the world's largest financial institutions for attempted manipulation, false reporting, customer fund violations, wash trading, or supervision failures, or against a Ponzi schemer who perpetrates a multi-million dollar scam on the unsuspecting public. As a result of these efforts, the Commission filed 102 enforcement actions in FY 2012. The Commission also opened more than 350 new investigations in FY 2012, among the highest annual count of new investigations in program history. In addition, the DOE obtained orders imposing more than $900 million in sanctions, including orders imposing more than $450 million in civil monetary penalties and directing the payment of more than $450 million in restitution and disgorgement.
Goal Three Key Results
Cases Involving Manipulation, False Reporting, Wash Trades and Position Limits
In a landmark case, the CFTC filed charges against Barclays PLC and two affiliates for attempted manipulation and false reporting concerning LIBOR and other global benchmark interest rates. The charges were simultaneously settled pursuant to an Order requiring Barclays to pay $200 million, the largest fine ever imposed by the CFTC, and requiring Barclays to implement a number of measures to ensure the integrity of the bank's benchmark submissions.
The CFTC settled charges previously filed in Federal court against a global proprietary trading company, Optiver Holding BV, two of its subsidiaries and three then-company officers for manipulating and attempting to manipulate crude oil and other energy futures contracts. The court-approved settlement required the defendants to pay $14 million and included trading limitations for one of the corporate defendants and the three individual defendants.
The CFTC filed charges against Joseph F. Welsh, a former broker with MF Global, alleging that Welsh attempted to manipulate prices of palladium and platinum futures contracts, and with aiding and abetting the attempted manipulations of Christopher L. Pia, a former portfolio manager of Moore Capital Management, LLC. Both Pia and Moore Capital settled the separate actions against them prior to FY 2012. The case against Welsh is pending in Federal court in New York.
The CFTC filed charges against Royal Bank of Canada (RBC), alleging a multi-hundred million dollar wash trading scheme involving stock futures contracts. The CFTC's complaint, which is pending in Federal court in New York, also alleged that RBC made false statements concerning material aspects of its wash sale scheme to OneChicago, LLC, an electronic futures exchange, and to CME Group, Inc.
The CFTC filed a number of separate actions against traders who exceeded the limits on the quantity of futures contracts they were lawfully permitted to hold, in the cotton, wheat, corn, and soybean markets. The penalties imposed in these cases pursuant to settlement orders ranged from $140,000 to $600,000, and in one case the sanction included disgorgement of $1 million in profits made from the excessively large position.
Cases Involving Customer Funds Safeguards and Supervision Obligations
The CFTC filed charges against Peregrine Financial Group Inc., a FCM, and its owner, Russell R. Wasendorf, Sr. alleging misappropriation of customer funds, violations of customer fund segregation laws, and making material false statements to the CFTC. The suit, which is pending in Federal court in Chicago, was filed within 24 hours after the fraud came to light.
The CFTC filed charges against JPMorgan Chase Bank for its unlawful handling of Lehman Brothers, Inc.'s customer funds prior to and after Lehman filed for bankruptcy in the midst of the financial crisis of 2008. The charges were simultaneously settled pursuant to an Order requiring JPMorgan to pay $20 million, the largest CFTC sanction for a segregated fund violation to date.
The CFTC filed charges against MBF Clearing Corp. (MBF), a registered FCM, alleging that MBF violated laws requiring the segregation of customer funds and that the firm failed to adhere to its supervision obligations. The case is pending in Federal court in New York.
The CFTC filed charges against Forex Capital Markets LLC (FXCM) for failing to supervise the handling of more than 57,000 customer accounts that were disadvantaged by FXCM's system that allowed for one-sided "slippage" in forex prices. The charges, which also included a separate violation for FXCM's failure to produce certain records promptly to the DOE, were settled simultaneously pursuant to an Order requiring FXCM to pay more than $14 million.
The CFTC filed charges against Goldman Sachs Execution & Clearing, L.P. (GSEC), a FCM, for supervision violations arising from GSEC's failure to investigate signs of questionable conduct by a GSEC client. The charges were simultaneously settled pursuant to an Order requiring GSEC to pay $7 million.
The CFTC filed charges against Rosenthal Collins Group, LLC (RCG), a FCM, for failing to supervise an RCG account that an RCG client was using to perpetrate a multi-million dollar commodity futures Ponzi scheme. (The DOE charged the RCG client, Enrique F. Villalba, and his company for the underlying fraud prior to FY 2012.) The charges against RCG were simultaneously settled pursuant to an Order requiring RCG to pay $2.5 million.
Cases Involving Ponzi and Other Fraud Schemes, and False Statements to the CFTC
The CFTC filed charges against Ronnie Wilson and Atlantic Bullion & Coin, Inc. alleging that they operated a $90 million Ponzi scheme involving fraudulent contracts for purchases and sales of silver. The complaint, which is pending in a Federal court in South Carolina, uses the agency's new Dodd-Frank Act authority prohibiting fraud schemes in connection with a contract of sale of a commodity in interstate commerce.
The CFTC filed charges against Nikolai S. Battoo and his four companies alleging fraud in connection with commodity pools that allegedly accepted over $140 million from U.S. investors. The case is pending in Federal court in Chicago.
The CFTC filed charges against Steven Pousa of Australia, Joel Friant of the United States, and their company Investment Intelligence Corp, alleging they conducted a global fraudulent off-exchange forex scheme, allegedly accepting at least $53 million from at least 960 clients. The case is pending in a Federal court in Texas.
The CFTC filed charges against Donald Newell and his company Quiddity LLC, a registered CPO and trading advisor, alleging that they fraudulently allocated more profitable trades to themselves and less profitable trades to their customers. The DOE also charged Newell under the Commission's new Dodd-Frank Act authority with making material false statements to the DOE during its investigation of this matter. The case is pending in Federal court in Chicago.
Cooperation with Law Enforcement Partners
In FY 2012, the CFTC worked actively with Federal and state criminal and civil law enforcement authorities, including by assisting them in more than 200 investigations and prosecutions, 50 of which were related to separate actions commenced by the CFTC. The DOE also continued to give assistance to and receive assistance from international regulators. For example, in FY 2012 the DOE received responses to more than 300 requests for assistance that it made of more than 70 different regulators under the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information, and other information-sharing arrangements. The international regulatory community has been instrumental to the CFTC's success in a number of important actions.
Whistleblower Program
The Commission's Whistleblower Office (WBO) receives and processes tips, complaints, and award claims from whistleblowers, as well as tips and complaints from non-whistleblower correspondents. During FY 2012, WBO developed and implemented internal policies and procedures, and helped design and launch a new web portal on http://www.cftc.gov where individuals can file tips and complaints electronically. WBO is also raising awareness of the program among interested stakeholders—including whistleblowers and their attorneys, industry and professional groups, other government agencies, SROs, and academia—through panel and seminar appearances, webinars, speeches, articles, web postings, and by answering questions posed directly to WBO about the program.
Information Technology
The Commission has streamlined tips, complaints, and referrals reporting for both whistleblowers and other market participants. Reporting is now supported by an online portal which provides straight-through processing to the eLaw systems used to support enforcement activities.
The Commission continues to upgrade eLaw technology and implement new capabilities like Financial Investigatory Software that reduces the time required to ingest, parse, and conduct preliminary analysis of bank statements and other financial data. This ensures that staff remains on a level playing field with industry legal staff. The Commission has also increased the use of analysis tools by investigators to provide more insight into potential enforcement actions.
