Release Number 8672-23
Federal Court Orders Texas Energy Broker, Its Owners, and Affiliated Trading Firms to Pay Nearly $3 Million For Fraud, Trading Against Customers Without Consent and Failure to Supervise
March 08, 2023
Washington, D.C. – The Commodity Futures Trading Commission today announced the U.S. District Court of the Northern District of Texas entered a consent order on March 7 imposing monetary sanctions and injunctive relief against Coquest Inc. (Coquest), a registered introducing broker (IB), its owners Dennis Weinmann and John Vassallo, and affiliated trading firms Buttonwood LLC (Buttonwood) and Weva Properties Ltd. (Weva), all of Dallas, Texas.
The order resolves an October 20, 2021 lawsuit, and finds the defendants liable for misappropriating the block trade order information of Coquest’s brokerage customers without their knowledge or consent. Coquest, Weinmann, Buttonwood, and Weva defrauded Coquest customers, and Coquest, Weinmann, Vassallo, and Buttonwood failed to diligently supervise customer commodity interest accounts.
The order requires the defendants to disgorge $496,021 in illicit profits and pay an additional $2.5 million civil monetary penalty. The order also imposes six-month trading and registration bans on Weinmann, and bans Weinmann and Coquest from brokering block trades on behalf of other people for two years. Additionally, the order permanently enjoins the defendants from engaging in further violations of the Commodity Exchange Act and CFTC regulations.
The CFTC charged the defendants with taking the opposite side of thousands of brokerage customer block trade orders without the customers’ prior consent. Weinmann took the opposite side of Coquest customer orders on behalf of accounts at Buttonwood and Weva that he controlled and in which he had a financial interest. He did this on more than 2,000 occasions between May 2015 and September 2019 without the customers’ knowledge or consent. Through this scheme, Weinmann was able to obtain block trade prices for his accounts that may not have been available if he was openly participating as a trader in the block trade market. Weinmann obtained profits for the Buttonwood and Weva accounts, at Coquest customers’ expense, by trading against the customers at prices that were less favorable to the customers than the prices he knew or should have known to be available in the market. Weinmann also deceived or attempted to deceive Coquest customers into believing he was reporting bids and offers made by third-party trading counterparties, when in fact Weinmann was making the bids or offers on behalf of the Buttonwood or Weva accounts. The order also states this activity constituted fraudulent misappropriation of the customers’ material nonpublic information. The order further states Weinmann and Vassallo each failed to diligently supervise the handling of commodity interest accounts and activities relating to Coquest’s and Buttonwood’s business.
The CFTC thanks the National Futures Association for its assistance in connection with this matter.
The Division of Enforcement staff members responsible for this case are Douglas Snodgrass, Bryan Hsueh, Nina Ruvinsky, David Terrell, Scott Williamson, and Robert Howell.