Golden Valley, Minnesota-based Ceres Global Ag Corp. has been ordered to pay $3 million to settle charges of attempting to manipulate the price of oats futures contracts, the Commodity Futures Trading Commission (CFTC) announced Monday.
The CFTC alleges that Ceres senior personnel knowingly engaged in a scheme to inflate the price of July 2016 and March 2017 oats futures. The company reportedly built large long positions near the speculative limits, maintained those positions through the delivery period, and took delivery of the oats with the intent of both increasing futures prices and securing lower-priced, higher-quality oats.
According to the order, a former Ceres officer directed traders in June 2016 to convert a short position in the July 2016 contract to a long position of 600 contracts (3 million bushels), hitting the exchange-set speculative limit. Traders were also instructed to repurchase shipping certificates without revealing the company’s intention to take delivery upon contract expiration. Ceres ultimately took delivery of 484 contracts and entered into offsetting transactions for an additional 53.
The CFTC claims Ceres repeated this activity with the March 2017 oats futures contract, again aiming to influence prices. The company built a long position, held it through delivery, and took delivery of 337 contracts, with an additional 224 covered through offsetting transactions – despite having no immediate need for the oats.
“If Ceres thought it could roll the oats market without consequence, it was mistaken,” stated Ian McGinley, Director of Enforcement at the CFTC. “The CFTC will act decisively to protect all its agricultural markets, as well as the producers, market participants, and consumers who rely on them.”
In addition to the $3 million penalty, Ceres is required to cease and desist from further violations of the Commodity Exchange Act (CEA). The CFTC noted that Ceres has already implemented remedial measures to improve future compliance.
The case was led by CFTC staff members Ben Sedrish, Brandon Wozniak, Joseph J. Patrick, Allison V. Passman, Kelly Beck, William Janulis, Scott Williamson, and Robert T. Howell.
The CFTC encourages individuals with information about potential violations of commodity trading laws to report them via the toll-free hotline 866-FON-CFTC (866-366-2382), online tip submission, or through the Whistleblower Office. Whistleblowers may be eligible for a reward of 10-30% of collected monetary sanctions.
Source: CFTC.gov
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