Release Number 8627-22

CFTC Charges Former Energy Broker with Paying Brokerage Kickbacks and Misappropriating Nonpublic Information

November 16, 2022

Washington, D.C. The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against Lee Tippett, a former energy broker with Classic Energy, LLC, for participating in a scheme to pay kickbacks to Matthew Clark, a trader employed by one of Classic’s brokerage customers. The order finds Tippett made these kickback payments to Clark in exchange for Clark sending more brokerage business from his employer to Classic. According to the order, Tippett also participated in a scheme to misappropriate confidential block trade order information from the same Classic customer, facilitated fictitious trades, and made false statements to ICE Futures US. 

The order requires Tippett to disgorge $695,000 in ill-gotten gains, imposes a $500,000 civil monetary penalty, permanently bans Tippett from trading commodity interests, and requires him to comply with undertakings never to apply for registration or engage in any activity requiring registration with the CFTC. 

“The CFTC will vigorously pursue and take action to stop corruption among brokers and other intermediaries that facilitate trading in the derivatives markets, whether they are making illegal kickback payments or misappropriating nonpublic information,” said Acting Director of Enforcement Gretchen Lowe. “Today’s action demonstrates that the CFTC is committed to taking action against all individuals who engage in such conduct.”

Case Background

According to the order, at Clark’s request, Classic hired Tippett as a broker in November 2015 for the purpose of facilitating kickback payments to Clark. Tippett was a longtime associate of Clark and had no experience as a broker prior to being hired by Classic. As part of this kickback scheme, Tippett would broker natural gas futures block trades for Clark’s employer, but would pay most of the commission income he earned on these trades back to Clark in exchange for Clark sending more brokerage business to Classic. Beginning on or around November 23, 2015, and continuing through August 2019, Tippett paid Clark approximately $3,185,775, and kept $695,000 of this commission income for himself. According to order, Tippett concealed these payments to Clark in a variety of ways, including by sending cash directly to Clark’s family members or by transferring money to shell companies set up by Clark. Tippett admits the facts of this misconduct and acknowledges this conduct violated the Commodity Exchange Act (CEA).

In addition, the order finds Tippett engaged in a scheme to misappropriate confidential block trade order information from Classic’s brokerage customers. Tippett did so by disclosing certain block trade order information provided to him by a trader acting at Clark’s direction. The information was disclosed to Peter Miller, an individual proprietary trader. Miller in turn traded on the basis of this information and shared his trading profits with other scheme participants, but not Tippett. The CFTC previously filed complaints against Clark and Miller for their roles in this scheme. [See CFTC Press Release No. 8490-22] [See CFTC Press Release No. 8468-21]    

In addition, the order finds Tippett made false statements to ICE on September 15, 2016, in connection with ICE’s investigation of certain block trades brokered by Classic. According to the order, Tippett made these false statements to conceal certain misconduct by Mathew Webb, Classic’s owner and president, for which the CFTC previously charged Webb. [See CFTC Press Release No. 8030-19]

On August 17, 2021, Tippett entered a guilty plea in a separate, parallel criminal action against Tippett in the U.S. District Court for the Southern District of Texas (U.S. v. Tippett, 4:21-cr-364). 

The Division of Enforcement staff members responsible for this action are Alison Auxter, Clemon Ashley, Lauren Fulks, Thomas Simek, Christopher Reed, and Charles Marvine.