Washington D.C. – The Commodity Futures Trading Commission (CFTC) has settled charges against Beijing-based COFCO Corp. and its subsidiary, Chinatex Corp., Ltd., for engaging in wash trading, violating position limits, and failing to accurately report trading data. The companies will jointly pay a $720,000 civil monetary penalty.
The CFTC order details that between April 22 and May 1, 2020, traders at Chinatex executed a wash trading scheme. This involved simultaneously entering purchase orders for ICE Cotton No. 2 futures in Chinatex’s account alongside offsetting sale orders in an affiliated company’s account. The purpose of this coordinated trading was to liquidate and re-establish a long position, ultimately benefiting COFCO, while minimizing risk and avoiding price competition. The orders were matched closely in price and delivery month, designed to be executed in sequence.
The investigation also revealed that COFCO exceeded speculative position limits while trading ICE Cotton No. 2 futures. In March 2020, aggregated COFCO subsidiaries held net short positions surpassing the 5,000-contract limit. A similar violation occurred in November 2021, with subsidiaries exceeding the 5,950-contract limit. Additionally, these subsidiaries failed to accurately report their cash-market exposure as required.
This enforcement action is complemented by a separate disciplinary action taken by ICE Futures U.S. on July 20. ICE Futures U.S. settled with Chinatex and an affiliate for trade practice violations, detrimental conduct, unauthorized use of trader identification, position limit breaches, misuse of a hedge exemption, and supervisory failures.
The CFTC acknowledged the assistance provided by ICE Futures U.S. during the investigation. The case was led by Janet Briner, Kelly Beck, Ashley J. Burden, Matt Edelstein, Joseph Konizeski, Garrett Eason, John Buffington, Scott Williamson, and Robert Howell of the Division of Enforcement.
The CFTC encourages individuals to report suspicious activity or potential violations of commodity trading laws through its toll-free hotline (866-FON-CFTC), online tip/complaint form, or by contacting the CFTC Whistleblower Office. Whistleblowers may be eligible for a reward of 10-30% of collected monetary sanctions paid from the CFTC Customer Protection Fund.
Source: CFTC.gov
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