WASHINGTON, D.C. – Benjamin Hutchen, formerly a managing director and branch manager at Morgan Stanley & Co. LLC, has been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for arranging the unlawful execution of noncompetitive futures trades. The CFTC issued an order on November 27, 2012, detailing charges of “fictitious sales” and the reporting of non-bona fide prices in violation of the Commodity Exchange Act (CEA) and CFTC regulations.
Hutchen, of Winnetka, Illinois, engaged in the unlawful activity over an 18-month period, spanning from April 18, 2008, through October 29, 2009. According to the CFTC order, Hutchen executed numerous off-exchange trades, primarily in Eurodollar and Treasury Note futures contracts. These trades were falsely reported to the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) as Exchange for Related Positions (EFRPs).
The investigation revealed that these trades did not meet the requirements of lawful EFRPs, lacking the necessary corresponding cash or over-the-counter derivative positions as mandated by CME and CBOT rules. Consequently, the transactions were deemed “fictitious sales,” resulting in the inaccurate reporting of prices, a direct violation of Section 4c(a) of the CEA and CFTC regulation 1.38(a).
As a result of the CFTC’s action, Hutchen is required to pay a $300,000 civil monetary penalty. He is also suspended from acting as an Associated Person for a period of four months. The order explicitly prohibits Hutchen from future violations of the cited CEA section and CFTC regulation.
This action follows a related settlement with Morgan Stanley in June 2012, where the firm was charged with the same violations, as well as a failure to adequately supervise, resulting in a $5 million civil monetary penalty. The CFTC acknowledged the assistance of the CME Group in this investigation.
Source: CFTC.gov
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