CHICAGO, IL – April 1, 2015 – The U.S. Commodity Futures Trading Commission (CFTC) has filed a civil enforcement complaint against Aitan Goelman, stemming from alleged manipulation of wheat prices. The case, filed in the U.S. District Court for the Northern District of Illinois, accuses Kraft Foods Group, Inc. and Mondelēz Global LLC, of manipulating and attempting to manipulate the prices of cash wheat and wheat futures contracts.
According to the CFTC, in late Summer 2011, Kraft and Mondelēz responded to rising cash wheat prices by implementing a strategy in December 2011 to purchase $90 million worth of December 2011 wheat futures. This purchase represented approximately a six-month supply of wheat for the companies. The CFTC alleges that Kraft and Mondelēz did not intend to take delivery of the wheat but instead aimed to artificially lower cash wheat prices and increase the spread between December 2011 and March 2012 wheat futures.
The complaint further alleges that this strategy successfully shifted prices, resulting in profits exceeding $5.4 million for Kraft and Mondelēz. Additionally, the CFTC claims that on five dates in early December 2011, the companies exceeded the Chicago Board of Trade’s (CBOT) 600-contract speculative spot month position limit by as much as 2,110 contracts, without a valid hedge exemption or legitimate hedging need.
The CFTC also alleges a pattern of non-compliant off-exchange futures transactions conducted by Kraft and Mondelēz between separate corporate trading accounts, spanning from approximately 2003 through January 2014. These transactions reportedly violated exchange rules governing noncompetitive trades.
The CFTC is seeking a permanent injunction against future violations of federal commodities laws, as well as disgorgement of ill-gotten gains and civil monetary penalties. The case is being pursued by CFTC staff members Robert Howell, Jennifer E. Smiley, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, David Amato, Gene Kunda, and Jerry Lavin.
The outcome of this case could have significant implications for market participants and the integrity of the derivatives markets, according to CFTC Director of Enforcement, Aitan Goelman, who emphasized that companies dissatisfied with cash prices cannot resort to manipulative trading strategies.
Source: CFTC.gov
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