For Release: April 8, 2008
U.S. CFTC Sanctions Two NYMEX Brokers for Fraudulent Trade Practice Schemes in Joint Investigation with the NY County District Attorney’s Office
Washington, DC − The U.S. Commodity Futures Trading Commission (CFTC) announced today the issuance of two orders filing and simultaneously settling charges against New York Mercantile Exchange (NYMEX) brokers Steven Karvellas of Allendale, NJ and Thomas Maloney of Springfield, NJ for fraudulently allocating trades to their personal accounts and depriving customers of the opportunity to profit. The orders require Karvellas and Maloney, in total, to pay $437,500 in penalties and permanently prohibit them from trading in the commodities markets.
The CFTC actions resulted from a joint CFTC cooperative enforcement investigation with the New York County District Attorney’s Office (NYCDAO) of abusive trading practices on the NYMEX. Karvellas, a registered floor broker and former board member of the NYMEX, and Maloney, also a registered floor broker, each were charged with separately diverting profitable transactions to their own accounts that had been filled for customers. Karvellas also ordered the destruction of an order ticket to conceal his involvement in the scheme.
CFTC Acting Chairman Walter Lukken said: “As today’s actions show, civil and criminal agencies achieve powerful results when they work together to stamp out fraud. The CFTC will continue to coordinate our civil prosecutions with local, state, and federal criminal authorities to protect the investing public from wrongful activity in our markets.”
Gregory G. Mocek, CFTC Enforcement Director, also commented: “Today's actions demonstrate the CFTC's continuing commitment to eradicating fraud in the futures markets. In conjunction with actions taken by the New York County District Attorney’s Office, the CFTC's cases seek to halt abusive trading practices that have defrauded small investors and large institutions alike. The Commission has devoted substantial resources to protecting the public and the markets against illegitimate futures operations.”
In using the trade practice scheme, both Karvellas and Maloney deprived their customers of the opportunity to profit. Karvellas was ordered to pay a $375,000 civil monetary penalty and Maloney was ordered to pay a $62,500 civil monetary penalty. Both are permanently barred from trading commodities contracts and registering with the CFTC.
In related matters, the NYCDAO announced that Karvellas and Maloney were charged with felony violations for the same underlying conduct. Maloney has pled guilty for this misconduct and has been promised a sentence of 5 years of probation and a $75,000 fine. Karvellas also pled guilty and has been promised a sentence of 5 months of incarceration and a $475,000 fine.
This investigation is ongoing. The CFTC would like to thank NYMEX compliance staff for their assistance with the investigation.
The following CFTC Enforcement Division staff were responsible for these cases: Judith Slowly, Philip Rix, Sheila Marhamati, Steven Ringer, Lenel Hickson, Stephen Obie, and Vincent McGonagle. In addition, Young Hwan Byeon, a Visiting Economist from the Korean Financial Supervisory Service, assisted in these cases.
Last Updated: April 8, 2008