FUTURES TRADER ORDERED TO PAY OVER $1.49 MILLION

The following is an excerpt from the CFTC website: "August 8, 2011 Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court default judgment order requiring Otmane El Rhazi to pay over $1.49 million in restitution and a civil monetary penalty for unlawful trading, misappropriation, and fraud. El Rhazi is a Moroccan national and a former futures and options trader and Vice President for Citigroup Global Markets Limited in the U.K. The order, entered on July 29, 2011 by Judge Denise Cote of the U.S. District Court for the Southern District of New York, requires El Rhazi to pay $373,860 in restitution and a $1,121,580 civil monetary penalty. The order also imposes permanent trading and registration bans against El Rhazi. The order stems from a CFTC complaint filed on April 15, 2011 (see CFTC Press Release 6025-11, April 18, 2011). The CFTC complaint charged El Rhazi with noncompetitive trading, fraud, and misappropriation from a Citibank, N.A. proprietary account for which he exercised trading authority as an employee of Citigroup Global Markets Limited. The court’s order finds that El Rhazi engaged in numerous noncompetitive and fictitious futures trades in order to steal money from a Citibank, N.A. proprietary account and pass the money to his personal account. Starting on November 23, 2010, El Rhazi engaged in a series of noncompetitive palladium and platinum futures transactions executed on the New York Mercantile Exchange’s Globex trading platform “in order to steal money from the Citi Account and pass the money to his own Personal Account,” according to the order. The effect of the transactions was that there was no net change in the open positions of either El Rhazi’s account or the Citibank, N.A. proprietary account. The order finds that as a result of the transactions, El Rhazi’s Personal Account profited and the Citibank, N.A. account cumulatively lost $373,860. The CFTC thanks the U.K. Financial Services Authority and the National Futures Association for their assistance.”

SEC CHARGES DELOITTE TAX LLP PARTNER IN INSIDER TRADING SCHEME

Too often people have the misconception that those who are extremely rich made their fortunes by building “a better mouse trap”. In fact, after watching all these fantastical frauds which are only now being exposed by the SEC it might seem that most people who make vast fortunes make their money through some sort of fraudulent scheme. The following release from the SEC goes into depth regarding a family of alleged fraudsters who use a legitimate position in a legitimate company to swindle honest investors out of their hard earned savings. The following is an excerpt from the SEC web page:

“SEC Charges Deloitte Partner and Wife in International Insider Trading Scheme
FOR IMMEDIATE RELEASE
2010-234
Nov. 30, 2010 — The Securities and Exchange Commission today charged a former Deloitte Tax LLP partner and his wife with repeatedly leaking confidential merger and acquisition information to family members overseas in a multi-million dollar insider trading scheme.

The SEC alleges that Arnold McClellan and his wife Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte's clients to Annabel's sister and brother-in-law in London. After receiving the illegal tips, the brother-in-law took financial positions in U.S. companies that were targets of acquisitions by Arnold McClellan's clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans. Their insider trading reaped illegal profits of approximately $3 million in U.S. dollars, half of which was to be funneled back to Annabel McClellan.
The UK Financial Services Authority (FSA) has announced charges against the two relatives — James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders whom he tipped with the nonpublic information in the course of his work at his London-based derivatives firm. Sanders's tippees and clients made approximately $20 million in U.S. dollars by trading on the inside information.
"The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong," said Robert Khuzami, Director of the SEC's Division of Enforcement. "In this day and age, whether it's across oceans or across markets, the SEC and its domestic and foreign law enforcement partners are committed to identifying and prosecuting illegal insider trading."
Marc J. Fagel, Director of the SEC's San Francisco Regional Office, added, "Deloitte and its clients entrusted Arnold McClellan with highly confidential information. Along with his wife, he abused that trust and used high-placed access to corporate secrets for the couple's own benefit and their family's enrichment."
According to the SEC's complaint, Arnold McClellan had access to highly confidential information while serving as the head of one of Deloitte's regional mergers and acquisitions teams. He provided tax and other advice to Deloitte's clients that were considering corporate acquisitions.
The SEC alleges that between 2006 and 2008, James Sanders used the non-public information obtained from the McClellans to purchase derivative financial instruments known as "spread bets" that are pegged to the price of the underlying U.S. stock. The trading started modestly, with James Sanders buying the equivalent of 1,000 shares of stock in a company that Arnold McClellan's client was attempting to acquire. Subsequent deals netted significant trading profits, and eventually James Sanders was taking large positions and passing along information about Arnold McClellan's deals to colleagues and clients at his trading firm as well as to his father.
Among the confidential impending transactions allegedly revealed by McClellan:
Kronos Inc., a Massachusetts-based data collection and payroll software company acquired by a private equity firm in 2007.
aQuantive Inc., a Seattle-based digital advertising and marketing company acquired by Microsoft in 2007.
Getty Images Inc., a Seattle-based licenser of photographs and other visual content acquired by a private equity firm in 2008.
The SEC's complaint alleges the following chronology involving insider trading around the Kronos transaction:
November 2006: Arnold McClellan begins advising Deloitte client on planned Kronos acquisition.
Jan. 29, 2007: McClellan signs confidentiality agreement.
Jan. 31, 2007: Following call from Annabel's cell phone, James Sanders begins buying Kronos spread bets in his wife's account.
March 11, 2007: Arnold McClellan has two-hour cell phone call with client to discuss acquisition. Less than an hour later, call from same cell phone to Annabel's family.
March 12-14, 2007: James Sanders increases size of Kronos bets.
March 16, 2007: James Sanders informs another family member that Annabel is the source of his tips; describes his agreement to split profits with her 50/50.
March 23, 2007: Deloitte client publicly announces Kronos acquisition. Kronos stock price increases 14 percent; James Sanders and other tippees reap approximately $4.9 million in U.S. dollars.
The SEC's complaint charges Arnold and Annabel McClellan with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and financial penalties.
The SEC's case was investigated by Victor W. Hong, Monique C. Winkler, Alice L. Jensen, and Jina L. Choi of the San Francisco Regional Office. The Commission would like to thank the UK Financial Services Authority, the U.S. Attorney's Office for the Northern District of California, and the Federal Bureau of Investigation for their assistance in this matter.”

The above case shows how manipulated our securities markets have become over the last several years. At one time the SEC and others would pounce on people who did anything that was remotely inappropriate. However, over the years market manipulation was looked upon as a good business practice by at least the last two presidential administrations (One democrat and one republican). The SEC under this current administration is at least trying to control the use of fraud as a legitmate part of finance.