September 25, 2015
Federal Court in Illinois Orders Futures International LLC and its Chief Operating Officer, Amedeo Cerrone, to Pay $500,000 Penalty for Recordkeeping Violations, False Statements, Unauthorized Trading, and Supervision Failures
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Robert W. Gettleman of the U.S. District Court for the Northern District of Illinois entered a Consent Order settling CFTC charges against Defendants Chicago-based Futures International LLC (FI) and its Chief Operating Officer Amedeo Cerrone of St. Charles, Illinois, for failing to adequately record customer orders; failing to maintain required records relating to commodity futures transactions; submitting order tickets bearing false timestamps; unauthorized trading; and failing to provide adequate supervision. FI is a registered Introducing Broker. The Order requires FI and Cerrone jointly to pay a civil monetary penalty of $500,000.
The Court’s Order stems from a CFTC Amended Complaint filed October 9, 2014 (see CFTC Press Release and Amended Complaint 7034-14, October 9, 2014).
The Order finds that, between January 2009 and November 2012, FI failed to record all customer orders immediately upon receipt, as required by CFTC Regulations, and that FI employees instead often recorded order information only after orders were executed. In particular, the Order finds, with Cerrone’s knowledge, FI employees routinely timestamped blank order tickets and then used these “pre-timestamped” tickets to document trades, making it appear as though FI had complied with the applicable recordkeeping requirements. Ultimately, FI’s order tickets with false timestamp information were transmitted to the Chicago Mercantile Exchange for clearing, according to the Order.
The Order also finds that FI employees communicated electronically about commodity futures transactions, including via instant messages. Although Cerrone knew this and was responsible for collecting such communications, FI failed to maintain full and complete records of these communications, in violation of CFTC Regulations, according to the Order. The failure to retain all electronic communications relating to FI’s commodity futures transactions resulted in an incomplete audit trail hindering the CFTC’s ability to investigate violations of the Commodity Exchange Act (CEA) and CFTC Regulations, the Order finds.
Additionally, according to the Order, FI, through one of its principals, improperly exercised discretion over commercial customers’ accounts without written powers of attorney and executed trades without first receiving instructions from customers as to the commodity to be purchased and the amount. At times, FI employees executed trades without knowing whether any customer would even accept the trade.
The Order further finds that FI did not have written policies and procedures regarding trading floor operations until at least September 2012 and that FI and Cerrone did not provide adequate training to employees. Additionally, they failed to implement policies and procedures to ensure compliance with the CEA and CFTC Regulations.
In addition to requiring FI and Cerrone to pay a civil monetary penalty of $500,000, the Order also permanently prohibits FI and Cerrone from further violations of the CEA and CFTC Regulations, as charged.
On October 9, 2014, the CFTC filed and settled charges against Kent Woods, FI’s former Chief Executive Officer, for violations arising from the same underlying facts (see CFTC Press Release and Order 7034-14, October 9, 2014). The Order in that action requires Woods to pay a $200,000 civil monetary penalty, to cooperate in any related action, and to execute all non-electronic orders only through his current employer’s floor desk for two years. The Order also permanently prohibits Woods from further violations of the CEA and CFTC Regulations, as charged.
The CFTC thanks and acknowledges the assistance of the CME Group, Inc. in this matter.
CFTC Division of Enforcement staff members responsible for this case are Allison Passman, Daniel Burstein, Joseph Patrick, Theodore Polley, Susan Gradman, Scott Williamson, and Rosemary Hollinger. Samantha Coxe also assisted in this matter.
Last Updated: October 5, 2015