For Release: October 2, 2008
CFTC’s 2008 Fiscal Year Enforcement Roundup: Agency Files 40 Actions, Obtains Record Amount in Penalties and Fines, Discloses Crude Oil Investigation, Forms Forex Task Force
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the enforcement results for its fiscal year 2008, which ended on September 30, 2008. During the year, the CFTC’s Division of Enforcement obtained a record total of more than $630 million in civil monetary penalties, restitution, and disgorgement from respondents and defendants in actions involving fraud, manipulation, and other misconduct. During the fiscal year, the agency continued its strong enforcement efforts in the energy sector, disclosed the existence of several ongoing investigations, and created a retail foreign currency task force.
“Without fail the professionals in the Division of Enforcement pursue every lead and every issue that arises in and across the commodity markets,” said CFTC Acting Director of Enforcement Stephen J. Obie. “This is real-time enforcement and it happens because our staff is committed to the mission of the CFTC to prevent manipulation and other disruptions to the markets, to ensure the financial integrity of transactions within those markets, and to protect market participants from fraudulent and abusive practices.”
The Division of Enforcement filed 40 new actions during the fiscal year, including 13 actions against hedge funds/pool operators/trading advisors, and two cases charging attempted manipulation and/or manipulation in the energy markets involving a former gasoline trader for BP Products North America Inc. and Optiver Holding BV and related companies and employees.
From 2002 to present, the CFTC’s Enforcement Division filed 335 cases and the CFTC was awarded in excess of $2.5 billion in civil monetary penalties, restitution, and disgorgement.
“The CFTC employs an aggressive enforcement program to ensure the integrity of the U.S. futures markets, which the public relies on for price discovery and risk management. Market manipulation, attempted manipulation and fraud will not be tolerated and I commend our Enforcement Division, led by Steve Obie, for its continued hard work and dedication to protecting the markets,” said CFTC Acting Chairman Walt Lukken.
Continued Manipulation and False Reporting Cases in the Energy Markets
During FY 2008, the CFTC continued its commitment to investigate and prosecute manipulation, attempted manipulation and false reporting in the energy markets. Since December 2002, the CFTC has charged a historical all-time high of 42 companies and 31 individuals in the energy sector for manipulation, attempted manipulation, false reporting and wash trading violations under the Commodity Exchange Act. The CFTC has thus far been awarded $445 million in civil monetary penalties from a number of the companies and individuals charged in those energy prosecutions. During the same period of time, the CFTC has worked cooperatively with the Department of Justice to assist in the criminal prosecution of 47 traders and energy companies. (See CFTC Press Release 5471-08, March 17, 2008.)
CFTC Publicly Discloses Ongoing Investigations of National Crude Oil, Cotton and Silver Market Misconduct
Although the CFTC ordinarily conducts enforcement investigations on a confidential basis, in light of the unprecedented market conditions during FY 2008, the Commission took the unusual step of publicly disclosing the existence of several ongoing investigations of market misconduct including:
Silver Market Investigation – In September 2008, the CFTC confirmed that its Division of Enforcement has been investigating complaints of misconduct in the silver market.
Cotton Futures Market Investigation – In June 2008, the CFTC announced that its Division of Enforcement has been conducting an ongoing investigation of the February/March 2008 price run-up in the cotton futures markets. (See CFTC Press Release 5504-08, June 3, 2008.)
National Crude Oil Investigation – In May 2008, the CFTC announced that in December of 2007, the agency’s Division of Enforcement launched a nationwide crude oil investigation into practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts. (See CFTC Press Release 5503-08, May 29, 2008.)
The specifics of these ongoing investigations remain confidential. All Commission enforcement inquiries are focused on ensuring that the markets are properly policed for manipulation and abusive practices.
Formation of Enforcement Task Force and Continuing Efforts to Combat Retail Foreign Currency Fraud
In August 2008, the CFTC announced the formation of a special task force charged with investigating and litigating fraud in the off-exchange retail foreign currency (forex) market. (See CFTC Press Release 5530-08, August 11, 2008.) The creation of the task force within the Division of Enforcement comes in the wake of Congress’ passage in June 2008 of “The Food, Conservation, and Energy Act of 2008” that clarified and strengthened the CFTC’s jurisdiction over this market. The task force is focusing on fraud in the retail forex market and will work cooperatively with other federal and state regulatory and criminal authorities.
Since enactment of the Commodity Futures Modernization Act in 2000, the CFTC has filed nearly 100 enforcement actions against firms and individuals selling illegal forex futures and option contracts. To date, the CFTC has obtained judgments in these enforcement actions for civil monetary penalties of more than $560 million and restitution of investor losses totaling $450 million.
Last Updated: October 2, 2008