WASHINGTON, D.C. – Commodity traders Adam Flavin and Peter Grady have been penalized by the Commodity Futures Trading Commission (CFTC) for attempting to manipulate the price of wheat futures and options contracts on the Chicago Board of Trade (CBOT) in March 2015. The CFTC issued orders against both men, settling charges related to their coordinated trading strategy.
According to the CFTC, Flavin, a Kansas resident, was responsible for both physical wheat transactions and CBOT wheat futures trading for a Commodity Merchandising Firm. Grady, a Colorado resident and employee of a subsidiary of the same firm, focused on speculative wheat futures and options trading and frequently communicated with those involved in physical wheat trading.
The investigation revealed that between March 3 and March 11, 2015, Flavin and Grady worked with others to acquire and prepare for delivery wheat containing 3 parts per million of deoxynivalenol (commonly known as Vomitoxin). They did so by purchasing and then cancelling 250 wheat shipping certificates. The intent, the CFTC alleges, was to create a false impression of demand for the lower-grade wheat, artificially inflating the value of related wheat spreads and options contracts.
Evidence presented by the CFTC included recorded conversations between Flavin and Grady. On March 6, they discussed their plan to “execute” the scheme and “catch this sucker off-guard,” with Flavin suggesting a concentrated cancellation of certificates to maximize market impact. Grady further explained the strategy to other traders on the same day.
As a result of the findings, Flavin has been ordered to pay a $125,000 civil monetary penalty. Grady faces a $250,000 penalty. Both men are prohibited for a specified period – four years for Flavin and nine months for Grady – from engaging in any commodity trading activities, including direct trading, trading on behalf of others, or soliciting funds for commodity purchases.
The CFTC’s enforcement action underscores its commitment to holding individuals accountable for market manipulation, stated James McDonald, Director of Enforcement. Both orders require Flavin and Grady to cease and desist from any further violations of the Commodity Exchange Act.
Source: CFTC.gov
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