Chicago, IL – Former Rosenthal Collins Capital Markets, LLC (now DV Trading LLC) trader Brandon Elsasser has been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for engaging in illegal wash trading, a practice designed to fraudulently inflate trading volumes and collect unwarranted exchange fee rebates. The CFTC announced the filing and settlement of charges against Elsasser and his former firm on Thursday.
The CFTC found that between early 2013 and July 2015, Elsasser and other proprietary traders at RCCM employed three distinct wash trading strategies within the Chicago Mercantile Exchange’s (CME) Eurodollar Pack and Bundle Market Maker Program. This program offered rebates to firms that met specific quoting obligations, incentivizing high trading volumes.
Investigators determined Elsasser devised a scheme to circumvent the firm’s internal wash trading detection systems, allowing him to trade against himself and generate rebates irrespective of genuine market activity. This continued until the activity was flagged. Prior to Elsasser’s scheme, other RCCM traders engaged in “scratch trading”—buying and selling contracts simultaneously—to artificially boost rebate earnings. This practice ceased when the CME threatened to exclude inter-trader transactions from rebate calculations.
Elsasser then implemented a third strategy, exploiting the exchange’s matching engine to execute wash trades that evaded detection. He profited by trading against himself in rebate-eligible products, effectively creating fictitious transactions to secure fee credits. RCCM’s compliance department failed to uncover these strategies until prompted by regulatory inquiries.
Through these schemes, RCCM accumulated rebates on approximately 300,000 Eurodollar contracts via over 8,000 wash transactions. As a result of the CFTC’s action, RCCM will pay a $5 million civil monetary penalty and cease and desist from violating relevant sections of the Commodity Exchange Act and Commission Regulations. Elsasser will personally pay a $200,000 penalty and is also ordered to cease and desist from similar violations.
The CFTC acknowledged the assistance of the CME Group, Inc., and staff members from its Division of Market Oversight and Division of Enforcement in the investigation.
Source: CFTC.gov
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