SEC ANNOUNCES FINAL JUDGEMENT AGAINST DEFENDANT IN "U TURN" PRICING INFORMATION SCHEME

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Obtains Final Judgment Against Edward O'connor

The Securities and Exchange Commission announced today that on July 30, 2013, the Honorable George B. Daniels of the United States District Court for the Southern District of New York entered a final judgment against defendant Edward O'Connor. The final judgment permanently bars O'Connor from service as an officer or director of a public company, orders him to pay disgorgement of $550,000 and a civil penalty of $150,000, and imposes permanent injunctions against future violations of the antifraud, corporate reporting, books and records, and internal accounting controls provisions of the federal securities laws cited in the Commission's complaint.

In its Complaint, as amended, the Commission alleged that O'Connor, a former director and executive officer of publicly traded commodities brokerage firm Optionable, Inc., took part in a scheme to "u turn" pricing information from defendant David Lee, a natural gas options trader at Bank of Montreal ("BMO"), back to reviewers at BMO as if the information had been independently verified. As a result of this scheme, the Commission alleged, BMO's financial results for the fiscal year ended October 31, 2006 and for the first quarter of fiscal year 2007 were materially overstated. The Commission also alleged that O'Connor and another defendant made misrepresentations in Optionable's periodic reports about the firm's valuation services, among other things, and deceived the operator of the New York Mercantile Exchange (NYMEX) through misrepresentations, in a stock purchase agreement, about the truthfulness of Optionable's SEC filings and its compliance with law. O'Connor consented to the entry of the final judgment without admitting or denying the Commission's allegations.

The litigation was handled by Joe Boryshansky, Jess Velona, and Daniel Walfish.

CFTC FILES AMENDED COMPLAINT ADDING DEFENDANT IN NYMEX CASE

FROM: COMMODITY FUTURES TRADING COMMISSION

CFTC Charges Ron Eibschutz with Aiding and Abetting Disclosures of Material Nonpublic Information about Customer Trades in its Case against the CME Group’s New York Mercantile Exchange and Two Former Employees

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed an amended Complaint in its pending enforcement action, U.S. Commodity Futures Trading Commission v. William Byrnes, et al. (U.S. District Court, Southern District of New York, 13 CIV 1174), naming Ron Eibschutz as a Defendant in its ongoing case against the New York Mercantile Exchange, Inc. (CME NYMEX), and two former CME NYMEX employees, William Byrnes and Christopher Curtin.

The amended Complaint charges CME NYMEX, Byrnes, and Curtin with violating the Commodity Exchange Act (CEA) and CFTC Regulations through the repeated disclosures during a two and one-half year period of material nonpublic customer information to Eibschutz, an outside commodity broker who was not authorized to receive the information, and charges Eibschutz with aiding and abetting the violations.

The CFTC’s amended Complaint alleges, as did the initial complaint, that at least from in or about February 2008 to September 2010, Byrnes knowingly and willfully disclosed material nonpublic information about CME NYMEX trading and customers, including about trades cleared through CME ClearPort, to Eibschutz on at least 60 occasions, and that between May 2008 and March 2009, Curtin knowingly and willfully disclosed the same type of information to Eibschutz on at least 16 additional occasions. The nonpublic customer information unlawfully disclosed by Byrnes and Curtin, in conversations often captured on tape, included details of recently executed trades, the identities of the parties to specific trades, the brokers involved in trades, the number of contracts traded, the prices paid, the structure of particular transactions, and the trading strategies of market participants, according to the amended Complaint.

The amended Complaint alleges that Eibschutz aided and abetted the violations of the CEA and CFTC Regulations, including by, among other things, repeatedly soliciting Byrnes and Curtin for the specific material nonpublic information they disclosed to him and providing them with information they needed to identify and locate information about the specific trades in which Eibschutz was interested.

In its continuing litigation, the CFTC seeks civil monetary penalties, trading and registration bans, and a permanent injunction prohibiting further violations of the federal commodities laws, as charged.

CFTC Division of Enforcement staff responsible for this case include Patrick Daly, James Wheaton, David W. MacGregor, Lenel Hickson, Stephen J. Obie, and Vincent A. McGonagle

CFTC CHARGES NYME AND TWO FORMER EMPLOYEES WITH DISCLOSING CUSTOMER TRADES

FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Charges CME Group’s New York Mercantile Exchange and Two Former Employees with Disclosing Material Nonpublic Information about Customer Trades

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed an enforcement action charging the New York Mercantile Exchange, Inc. (CME NYMEX), which is owned and operated by the CME Group, and two former CME NYMEX employees, William Byrnes and Christopher Curtin, with violating the Commodity Exchange Act and CFTC Regulations through the repeated disclosures of material nonpublic customer information over of period of two and one-half years to an outside commodity broker who was not authorized to receive the information.

The CFTC’s Complaint, filed on February 21, 2013, in the U.S. District Court for the Southern District of New York, alleges that Byrnes and Curtin worked on the CME ClearPort Facilitation Desk and were responsible for facilitating customer transactions reported for clearing through the CME ClearPort electronic system. The Complaint alleges that at least from in or about February 2008 to September 2010, Byrnes knowingly and willfully disclosed material nonpublic information about CME NYMEX trading and customers, including about trades cleared through CME ClearPort, to a commodity broker on at least 60 occasions. The Complaint further alleges that between May 2008 and March 2009, Curtin knowingly and willfully disclosed the same type of information to the same commodity broker on at least 16 additional occasions. The nonpublic customer information unlawfully disclosed by Byrnes and Curtin in conversations — often captured on tape — included details of recently executed trades, the identities of the parties to specific trades, the brokers involved in trades, the number of contracts traded, the prices paid, the structure of particular transactions, and the trading strategies of market participants, according to the Complaint.

The Complaint alleges that the CME NYMEX and the two former employees violated the Commodity Exchange Act and CFTC Regulations, which specifically prohibit the disclosures of this type of customer information.

The CFTC’s Complaint also alleges that in July 2009, a market participant complained to CME NYMEX that the participant believed nonpublic information about trades cleared through CME ClearPort had been disclosed by a CME NYMEX employee named "Billy." Although a CME NYMEX Managing Director who investigated the market participant’s complaint identified "Billy" to be William Byrnes, CME NYMEX did not then question Byrnes, and Byrnes’s illegal disclosures continued for over a year, until at least September 2010. Ultimately, CME NYMEX terminated Byrnes’s employment in December 2010 after yet another market participant complained to CME NYMEX about disclosures of nonpublic customer information. Curtin had previously left CME NYMEX voluntarily.

In its continuing litigation, the CFTC seeks civil monetary penalties, trading and registration bans, and a permanent injunction prohibiting further violations of the federal commodities laws, as charged.

CFTC Division of Enforcement staff responsible for this case include Patrick Daly, James Wheaton, David W. MacGregor, Lenel Hickson, Stephen J. Obie, and Vincent A. McGonagle.

TRADER CHARGED WITH MANIPULATION FUTURES PRICES OF PALLADIUM AND PLATINUM

The following excerpt is from the U.S. Commodity Futures Trading Commission website:
CFTC Charges Joseph F. Welsh III, Former MF Global Broker, with Attempted Manipulation of Palladium and Platinum Futures Prices

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a federal court action in the Southern District of New York chargingJoseph F. Welsh III, of Northport, N.Y., with attempted manipulation of the prices of palladium and platinum futures contracts, including the settlement prices, traded on the New York Mercantile Exchange (NYMEX). The CFTC complaint alleges that Welsh engaged in this conduct from at least June 2006 through May 2008 and specifically on at least 12 separate occasions.

The complaint charges Welsh with directly attempting to manipulate the palladium and platinum futures prices and with aiding and abetting the attempted manipulations of Christopher L. Pia, a former portfolio manager of Moore Capital Management, LLC, a CFTC registrant.

According to the complaint, while working as a broker at MF Global Inc., Welsh employed a manipulative scheme commonly known as “banging the close.”

Welsh allegedly routinely received market-on-close orders to buy palladium and platinum futures contracts from Pia, either directly or through a clerk, and also allegedly understood that Pia wanted to buy at high prices. To accomplish that, Welsh intentionally devised and implemented a trading strategy to attempt to maximize the price impact through trading during the two-minute closing periods of the palladium and platinum futures contracts markets (Closing Periods), the complaint charges.

The CFTC complaint also states that to push prices higher, Welsh routinely withheld entering the market-on-close buy orders until only a few seconds remained in the Closing Periods and thereby caused the orders to be executed within seconds of the close of trading.

The CFTC seeks civil monetary penalties, trading and registration bans and a permanent injunction against further violations of the federal commodities laws, as charged.

The CFTC settled related actions against Moore Capital Management LLC’s successor, Moore Capital Management, LP (Moore), and its affiliates and against Pia. On April 29, 2010, the CFTC issued an order filing and settling charges of attempted manipulation and failure to supervise against Moore and its affiliates. The CFTC’s order imposed a $25 million civil monetary penalty, restricted Moore’s market-on-close trading in the palladium and platinum futures and options markets for two years and restricted Moore’s registration for three years (see CFTC Press Release 5815-10).

On July 25, 2011, the CFTC issued an order filing and settling charges of attempted manipulation against Pia. The CFTC order required Pia, among other things, to pay a $1 million civil monetary penalty and permanently bans him from trading during the closing periods for all CFTC-regulated products and permanently bans him from trading CFTC regulated products in palladium and platinum (see CFTC News Release 6079-11).

The CFTC thanks the CME Group, the parent company of the NYMEX, for its assistance.
CFTC Division of Enforcement staff responsible for this case are Melanie Bates, Kara Mucha, James A. Garcia, August A. Imholtz III, Kassra Goudarzi, Jeremy Cusimano, Janine Gargiulo, Stephen Obie, Michael Solinsky, Gretchen L. Lowe, and Vincent A. McGonagle.