WASHINGTON, D.C. – Adam Flavin, a Kansas resident, and Peter Grady, of Colorado, have been penalized by the Commodity Futures Trading Commission (CFTC) for their roles in an attempted manipulation of wheat futures and options contracts on the Chicago Board of Trade (CBOT) in March 2015. The CFTC issued orders against both traders on September 26, 2018, outlining the charges and resulting penalties.
According to the CFTC, Flavin worked for a Commodity Merchandising Firm, buying and selling physical wheat and trading CBOT wheat futures for both hedging and speculative purposes. Grady was an employee of a subsidiary of the same firm, trading wheat futures and options speculatively and regularly communicating with those involved in physical wheat trading.
The orders detail a coordinated strategy between Flavin and Grady, along with others, to manipulate wheat prices between March 3 and March 11, 2015. This involved acquiring and preparing to deliver wheat containing 3 parts per million of deoxynivalenol (commonly known as Vomitoxin) by purchasing and cancelling 250 wheat shipping certificates. The intention was to create a false impression of demand for this specific type of wheat, artificially inflating the value of related spreads and options contracts.
The CFTC alleges that Flavin and Grady discussed their plan on March 6, 2015, with Flavin stating their actions would “send a very potent signal” if executed in a single day. Grady further explained his plan to other traders, aiming to catch the market “off-guard.”
As a result of their actions, Adam Flavin is required to pay a $125,000 civil monetary penalty and is prohibited for four years from engaging in any transactions involving commodity interests, either directly or on behalf of others. Peter Grady faces a $250,000 penalty and a nine-year ban from trading commodity interests. Both individuals are also required to cease and desist from further violations of the Commodity Exchange Act.
“This case shows the CFTC’s commitment to holding individual wrongdoers accountable for their misconduct,” stated James McDonald, CFTC Director of Enforcement. “We will not stop at corporate charges but will work vigorously to ensure the individuals who carried out the wrongful acts are held accountable as well.”
Source: CFTC.gov
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