Public Statements & Remarks

Dissenting Statement of Commissioner Caroline D. Pham Regarding the Filing of Administrative Complaints for Enforcement Actions

“Shotgun Hearings and Quickie Defaults”

September 29, 2023

I respectfully dissent on the Commission’s use of administrative proceedings before a hearing officer in the absence of CFTC Administrative Law Judges (ALJs) and in lieu of filing in federal court without an appropriate regard for due process. This creative “shotgun” approach to administrative proceedings, first devised only a couple years ago, flies in the face of decades of Commission standard practice and rules, bypasses federal Article III courts, and is a misuse of the CFTC’s adjudication authority.

The Commission should file these eight complaints in federal court as we typically do, instead of trying to ram in these administrative proceedings the day before the end of the fiscal year on September 30 when our enforcement metrics are calculated.  It is not acceptable for administrative agencies to utilize procedural shortcuts in litigation—no matter the reason. I support zealous pursuit of wrongdoing but the ends do not justify the means taken here.


The Commission has authorized the filing of eight administrative complaints pursuant to Section 6(d) of the Commodity Exchange Act (CEA)[1] seeking a cease-and-desist order for each Respondent that allegedly committed fraud, either by claiming falsely to be registered with or otherwise licensed by the CFTC or the National Futures Association on the internet, in violation of Section 6(c)(1) of the CEA,[2] and CFTC Rule 180.1.[3]  I have significant concerns with the Commission’s use of the “administrative hearing” process here, instead of filing complaints in federal court as has been Commission practice.


From the very beginnings and establishment of the Commission, and similar to other administrative agencies including the SEC,[4] the CFTC had ALJs to preside over administrative hearings in exercise of the Commission’s adjudication authority. This included litigation brought by the Division of Enforcement for violations of the CEA and CFTC rules. Indeed, many of our foundational legal precedents were findings in ALJ opinions that the Commission entered as orders and were reported in the Commodity Futures Law Reporter since 1974.  The CEA authorizes the use of ALJs to serve over administrative hearings, for example, as required under section 6(c)(4)(C)(iii) of the CEA.[5]

But, for the past 10 years, the Commission has not had any ALJs. Instead, the Commission has normally filed complaints in federal court.  Notwithstanding legal challenges to the use of ALJs, the SEC continues to follow its standard practice and formalities for administrative litigation of enforcement actions before the SEC’s ALJs.

The Division of Enforcement now seeks to file these administrative complaints pursuant to CEA Section 6(d) in reliance on CFTC Rule 10.8[6], by requesting the Commission to appoint the CFTC’s current “Administrative Judge” (previously known as the Judgment Officer of the CFTC’s Reparations Program)[7] as the “presiding officer” for these cases to conduct expedited hearings in the hopes of obtaining a quickie default judgment against all eight respondents.  As previously noted by Commissioner Stump in 2021, this concocted process is an alarming trend of boosting enforcement metrics.[8]

And these “administrative hearings” arguably can only proceed if the Respondents do not show up.  If any Respondent were to appear at their scheduled hearing, the Division of Enforcement would need to stand down and the Commission would be forced to reschedule the hearing before an ALJ or the full Commission.[9]

I believe that this pursuit of “efficiency” comes at too high a cost: the integrity of our administrative proceedings and due process.  My view is supported by the United States Court of Appeals for the Fifth Circuit’s recent decision in Jarkesy v. SEC[10], where the court held that the SEC’s authority to bring civil fraud charges before the SEC’s own ALJ is unconstitutional because it violates the Seventh Amendment right to a jury trial, the non-delegation doctrine, and the Take Care Clause of the Constitution.[11]  It logically follows that, if the Fifth Circuit deemed that an actual ALJ was insufficient, then a temporary hearing officer who is not an ALJ must be regarded as insufficient as well.  Moreover, it is concerning to me that the Commission has chosen to ignore the clear warning from the Fifth Circuit in Jarkesy given the Commission’s own recent defeat in the Fifth Circuit.[12]


The administrative hearing process under CEA Section 6(d) and Part 10 of CFTC regulations should not be used as an alternative to robust investigation and filing of a complaint in federal court, since the Commission has no ALJs.  Federal courts serve as an essential part of the checks-and-balances inherent in the separation of powers embodied in the United States Constitution.[13]  The federal courts impose discipline on the tendency for administrative agencies—including the CFTC—to exercise power for self-aggrandizement, and this is especially true with respect to the single-minded focus to file cases notwithstanding significant concerns.[14]

I believe these eight administrative complaints today are reflective of a concerning trend in our enforcement actions of the pursuit of efficiency to the occlusion of the investigation of the facts and the examination of the law.  This trend, if unchecked, can lead to undermining the public’s trust in the CFTC’s ability to oversee our markets with fairness and in service to justice—the very opposite of the Commission’s mandate.[15]


We must pursue credible evidence of fraudulent misrepresentations in our markets, and I appreciate the dedication of the Division of Enforcement.  But we must ensure that our administrative proceedings are fair and in accordance with the Administrative Procedure Act, the CEA, and CFTC rules.

We must not allow procedural shortcuts to undermine the Commission’s standard practice or our commitment to integrity.  It can lead to a lack of thorough investigation to fully develop the facts, potentially compromising the quality of our enforcement actions.  It should be hard—not easy nor “efficient”—for the government to infringe upon a person’s liberty or property.[16]

The Honorable Jed S. Rakoff astutely noted, with respect to the SEC’s use of administrative proceedings in lieu of the federal courts:

“I see no good reason to displace that constitutional alternative with administrative fiat, and I would urge the S.E.C. to consider that it is neither in its own long-term interest, nor in the interest of the securities markets, nor in the interest of the public as a whole, for the S.E.C. to become, in effect, a law [u]nto itself.”[17]

This principle must also hold true for the CFTC, who does not even have ALJs. We must hold ourselves to the highest standard.  I believe we can, and should, do better.

[1] 7 U.S.C. § 13b.

[2] 7 U.S.C. § 9(1).

[3] 17 C.F.R. § 180.1 (2022).

[4] See Office of Administrative Law Judges, U.S. Securities and Exchange Commission, available at

[5] 7 U.S.C. § 9(c)(4)(C)(iii). CEA Section 6(c)(4)(C)(iii) also permits for such hearing to be conducted before the Commission. Id.

[6] 17 C.F.R. § 10.8.

[7] This renaming by the Commission in 2021 of the Reparations Program’s Judgment Officer to the “Administrative Judge” is not to be confused with an “Administrative Law Judge.” The duties and function of the reparations officer were unchanged by the renaming.

[8] See, e.g., CFTC Charges 14 Entities for Fraudulently Claiming to be Registered with the Agency, Release No. 8693-23, U.S. Commodity Futures Trading Commission (April 21, 2023), available at  See also Concurring Statement of Commissioner Dawn D. Stump Regarding Enforcement Action Against Coinbase, Inc., U.S. Commodity Futures Trading Commission (Mar. 19, 2021), footnote 8, available at

[9] See, e.g., 7 U.S.C. § 9(c)(4)(C)(iii).

[10] Jarkesy v. Sec. & Exch. Comm’n, 34 F. 4th 446 (5th Cir. 2022), rehr’g en banc denied, 51 F.4th 644 (5th Cir. 2022).

[11]< Id.

[12]See, e.g., Clarke v. CFTC, 74 F.4th 627 (5th Cir. 2023).

[13] C.f. Statement of Commissioner Caroline D. Pham on Effective Self-Regulation and Notice of Proposed Rulemaking to Amend Part 40 Regulations, U.S. Commodity Futures Trading Commission (July 26, 2023), available at

[14] See, e.g., Commodity Futures Trading Comm’n v. Archegos Capital Management LP, No. 22-CV-3401 (JPO), 2023 WL 6123102 (Sept. 19, 2023) (dismissing CFTC’s Complaint on the grounds that the Commission does not have jurisdiction over the ETF swaps and the custom basket swaps at issue) and Concurring Statement of Commissioner Caroline D. Pham Regarding Amended Complaint, U.S. Commodity Futures Trading Commission (Oct. 21, 2022), available at  See also Commodity Futures Trading Comm’n v. Larralde, et al., Case No. 6:23-cv-1445-WWB-DCI (M.D. Fla. Aug. 31, 2023) (order dismissing CFTC complaint for shotgun pleading), and Commodity Futures Trading Comm’n v. Cartu, No. 20-cv-908, 2022 WL 1625175 (W.D. Tex. May 23, 2022) (report and recommendation by Federal magistrate Judge to dismiss CFTC’s complaint finding CFTC failed to individually address defendant’s contacts to this forum in their response—instead grouping him together with his brothers, among others.)

[15] I remind the Commission of the motto that is inscribed on the U.S. Department of Justice’s DC headquarters building: “Justice is founded in the rights bestowed by nature upon man. Liberty is maintained in security of justice.”

[16] See John Locke, Second Treatise of Government, Chapter XVIII, “Of Tyranny,” Section 201 (1690): “[F]or wherever the power, that is put in any hands for the government of the people, and the preservation of their properties, is applied to other ends, and made use of to impoverish, harass, or subdue them to the arbitrary and irregular commands of those that have it; there it presently becomes tyranny, whether those that thus use it are one or many.”

[17] See Honorable Jed S. Rakoff, District Judge, S.D.N.Y, Keynote Address at PLI Sec. Reg. Inst., Is the S.E.C. Becoming a Law Unto Itself? 7 (Nov. 5, 2014), available at