CFTC Cracks Down on Market Manipulation & Fraud

The Commodity Futures Trading Commission (CFTC) has taken decisive action against two separate cases of derivatives market misconduct, issuing over $1.2 million in total penalties.

In the first case, the CFTC sanctioned Brazilian energy company Raizen Energia SA and its Swiss subsidiary Raizen Trading SA for engaging in a pattern of illegal wash sales and non-competitive transactions. The order requires the Raizen entities to jointly pay a $750,000 civil monetary penalty.

According to the CFTC's findings, from March to September 2022 the respondents executed 44 prohibited "exchange for physical" (EFP) transactions involving sugar futures contracts traded on ICE Futures U.S. The EFPs were determined to be wash sales and non-competitive trades because they were executed between accounts under common control, rather than independent parties.

"Wash sales and non-competitive transactions undermine the integrity of the derivatives markets," said CFTC Director of Enforcement Brian Hunt. "The CFTC will continue to hold accountable any firms that engage in this type of market manipulation."

In a parallel action, ICE Futures U.S. also issued a $100,000 penalty against Raizen Energia for the wash trade violations and related supervisory failures.

In the second case, the CFTC cracked down on an unregistered forex trading fraud scheme, ordering Houston-based Get Money Tradez LLC (GMT) and its managing member Jeffrey Carmon, Jr. to pay over $520,000 in restitution and penalties.

The CFTC found that from July 2021 to the present, GMT and Carmon fraudulently solicited $950,000 from 19 members of the public to participate in two commodity pools they operated for retail forex trading. Carmon lied about his successful trading history and instead misappropriated over $113,000 of the pool funds for personal expenses.

Additionally, the respondents failed to register GMT as a commodity pool operator and Carmon as an associated person, as required by the Commodity Exchange Act.

"Fraudsters who falsely promise big profits and misuse customer funds to line their own pockets have no place in the derivatives markets," said Hunt. "The CFTC will continue to act swiftly to shut down these types of predatory schemes and hold the bad actors accountable."

The Raizen and GMT cases illustrate the CFTC's ongoing commitment to aggressively policing derivatives markets for manipulative trading practices and fraudulent activity that undermines market integrity and harms customers. Compliance professionals should view these actions as clear examples of the regulatory scrutiny and severe penalties that can result from such misconduct.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.