Former Chicago Board of Trade (CBOT) floor trader David Sklena of Skokie, Illinois, has been ordered to pay $6,608,750 in penalties for his role in a scheme to defraud customers trading Five-Year Treasury Note futures contracts. The judgment, entered on February 10, 2012, by Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois, stems from a complaint filed by the Commodity Futures Trading Commission (CFTC) in January 2008.
Sklena was found to have aided and abetted another trader in a fraudulent scheme that cheated customers placing orders. The court determined that on April 2, 2004, another floor trader sold 2,274 Five-Year Treasury Note futures contracts to Sklena at a significantly discounted price, violating both CFTC and CBOT regulations regarding open and competitive trading.
Following the initial non-competitive purchase, Sklena immediately resold 485 of the contracts back to the originating trader in another non-competitive trade. The remaining 1,789 contracts were then sold on the CBOT’s electronic trading platform at the prevailing market price, allowing Sklena to personally profit approximately $1.65 million. The court found that the combined non-competitive trading generated profits for both traders at the expense of their customers.
The CFTC determined that the scheme disadvantaged the other trader’s customers by a total of $2,048,781. As part of the order, Sklena is required to pay a $4,956,562.50 civil monetary penalty and disgorge $1,652,187.50. Furthermore, Sklena is permanently prohibited from engaging in any commodity-related activity, including trading, and is barred from registering with the CFTC.
The case was led by CFTC staff members Camille Arnold, Judy McCorkle, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
Source: CFTC.gov
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