Release Number 8471-21
Federal Court Orders Washington State Feedyard to Pay $263 Million for Phantom Cattle Fraud Scheme and Violating Position Limits
December 17, 2021
Washington, D.C. — The Commodity Futures Trading Commission announced today that Chief Judge Stanley A. Bastian of the U.S. District Court for the Eastern District of Washington issued an order granting a permanent injunction against Easterday Ranches, Inc., and requiring it to pay a combined $263 million in restitution and civil monetary penalty in connection with a phantom cattle fraud scheme.
The order specifically requires Easterday Ranches to pay $233,008,042 in restitution and a $30 million civil monetary penalty. Because Easterday Ranches has filed for bankruptcy protection, these amounts have been subordinated to the claims of other Easterday Ranches creditors. The company was also ordered to cease and desist from further violating the Commodity Exchange Act and CFTC regulations, from trading on or subject to the rules of any CFTC-registered entity, and from engaging in any activities requiring registration with the CFTC.
The court’s order stems from a CFTC complaint filed on March 31, 2021, charging Easterday Ranches and its former president, Cody Easterday, with the sale of more than 200,000 non-existent head of cattle to a beef processor, making false statements to an exchange, and violating exchange-set position limits. [See CFTC Press Release No. 8425-21]
The order finds that, from at least October 2016 to November 2020, Easterday Ranches submitted false invoices and reimbursement requests relating to more than 200,000 head of cattle that it never purchased or raised on the producer’s behalf. Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received more than $233 million to which it was not entitled.
In addition, the order finds that Easterday Ranches reported false or misleading information concerning its cattle inventory, purchases, and sales to the Chicago Mercantile Exchange in at least two hedge exemption applications seeking permission to exceed the exchange’s position limits. These false statements to the exchange were made in 2017 and 2018 to avoid disciplinary actions and scrutiny when Easterday Ranches exceeded exchange-based position limits in the live cattle and feeder cattle futures markets. Because they were based on false or misleading information, the hedge exemptions were invalid. As a result, Easterday Ranches violated exchange-set position limit violations on at least two occasions.
The CFTC acknowledges and appreciates the cooperation and assistance of the Chicago Mercantile Exchange in this matter.
The Division of Enforcement staff members responsible for this case are Ben Sedrish, Ashley J. Burden, Joseph Patrick, Yusuf Capar, Allison V. Passman, Scott Williamson, and Robert Howell. Legal Division staff members Melissa Chiang and Martin B. White assisted in the bankruptcy proceedings.