WHAT WE HAVE HERE IS A FAILURE TO SUPERVISE*

FROM:  COMMODITY FUTURES TRADING COMMISSION 

CFTC Orders Zulutrade Inc. to Pay $150,000 Penalty and Disgorge Profits of $80,000 to Settle Charges of Failure to Supervise Activities Relating to Its Business as a CFTC Registrant

Zulutrade is a CFTC-registered Introducing Broker located in Piraeus, Greece

Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against Zulutrade, Inc., a CFTC-registered Introducing Broker located in Piraeus, Greece, for failure to diligently supervise activities relating to its business as a CFTC registrant. Specifically, the CFTC’s Order found that for at least a three-year period from October 2010 to October 2013, Zulutrade failed to follow its procedures for screening for accountholders from the U.S. Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) targeted countries. The Order requires Zulutrade to pay a $150,000 civil monetary penalty and disgorge $80,000 in commissions and fees it earned from accounts that were related to the supervisory failure.

OFAC administers and enforces economic and trade sanctions against targeted foreign countries based on U.S. foreign policy and national security goals. U.S. persons and entities are generally prohibited from doing business with persons and entities from OFAC targeted countries. During the relevant period, Zulutrade had a procedure to screen for potential accountholders from OFAC targeted countries. That procedure provided that Zulutrade could delegate implementation of OFAC screening to third party service providers or agents provided Zulutrade had a written agreement with the service provider outlining the third party’s responsibilities, and that Zulutrade would actively monitor the delegation to assure that the procedures are being conducted in an effective manner.

However, Zulutrade failed to ensure that it had written agreements with all such entities. Consequently, Zulutrade opened approximately 400 accounts for accountholders from OFAC targeted countries (primarily Iran, Sudan, and Syria). All of the accounts opened for accountholders from targeted countries were from service providers with which Zulutrade did not have written agreements.

CFTC Division of Enforcement staff members responsible for this matter are Jennifer Diamond, David Terrell, Joy McCormack, Elizabeth M. Streit, Scott R. Williamson, and Rosemary Hollinger. The Division worked closely with staff from OFAC in this matter and wishes to thank OFAC for its assistance. OFAC has concluded a settlement with Zulutrade arising out of the same pattern of conduct.
*Aluding to the quote "What we have here is a failure to communicate," from the movie "Cool Hand Luke."

COURT ORDERS INTRODUCING BROKER TO PAY FINE FOR RECORD-KEEPING VIOLATIONS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Federal Court in Illinois Orders Chicago-based Introducing Broker New World Holdings, LLC to Pay $50,000 to Settle Record-Keeping Violation Action

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court Order against Defendant New World Holdings, LLC (NWH) of Chicago, Illinois, requiring NWH to pay a $50,000 civil monetary penalty for destroying business records and failing to diligently supervise employees.

The Consent Order for Permanent Injunction, entered by U.S. District Court Judge Robert W. Gettleman of the Northern District of Illinois on January 8, 2014, also permanently prohibits NWH from violating the Commodity Exchange Act and CFTC Regulations, as charged in the Complaint filed against NWH and two other Defendants on July 22, 2010 (see CFTC Press Release 5861-10). NWH is registered with the CFTC as an Introducing Broker and Commodity Trading Advisor.

The Order finds that, beginning on or about March 10, 2006, NWH introduced an account in the name of Idylic Solutions Pty Ltd. (Idylic) to a Futures Commission Merchant. In addition to the Idylic account, NWH introduced a number of other accounts from the same individuals who opened the Idylic account, or associated with them, including but not limited to accounts in the name of Unifund, Ltd., 888 Management, Inc., Secured Bond, Ltd., and Sagacity, Ltd. (collectively referred to as the “Pooled Accounts”). Deposits into the Idylic account and the Pooled Accounts in the aggregate exceeded $21 million throughout the relevant period, according to the Order.

NWH failed to retain all of the business records related to the Idylic account and Pooled Accounts, relating to NWH’s business of dealing in commodity futures, commodity options, and cash commodities, including but not limited to emails that were prepared in the course of its business of dealing in commodity futures, and further failed to keep said records for a period of five years from the date thereof, according to the Order.

The CFTC appreciates the assistance of the Australian Securities and Investments Commission in this matter.

CFTC staff members responsible for this case are Eugene Smith, Elizabeth N. Pendleton, Michael Amakor, Timothy J. Mulreany, and Paul Hayeck.