New York, NY – The Commodity Futures Trading Commission (CFTC) has filed a federal civil enforcement action against David Smothermon, of Houston, Texas, alleging he committed valuation fraud while employed as president and head trader of a gas division at an unnamed commodities-trading company. The complaint, filed in the U.S. District Court for the Southern District of New York, details a scheme to inflate the reported profit-and-loss value of the gas division’s trading book.
According to the CFTC, Smothermon’s actions concealed substantial losses, which ultimately totaled over $100 million for the company. The alleged fraud occurred between December 2015 and September 2016. Smothermon is accused of manipulating internal records to exaggerate the value of futures contracts and physical natural gas trades, effectively disguising the true extent of his trading losses.
Specifically, the CFTC alleges Smothermon directed employees to alter entries in the company’s system, changing the terms and values of physical trades. He also allegedly mismarked the daily mark-to-market value of his NYMEX futures positions. CFTC’s Director of Enforcement, James McDonald, stated the agency is “committed to rooting out dishonesty and fraud” in the commodities markets, emphasizing that such actions undermine risk management for all market participants.
The CFTC is seeking restitution, disgorgement of ill-gotten gains, civil monetary penalties, a trading ban, and a permanent injunction against Smothermon to prevent future violations of federal commodities laws. The agency received assistance from the United States Attorney’s Office for the Southern District of New York during the investigation. The case is being pursued by Gates S. Hurand, Trevor Kokal, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan of the CFTC’s Division of Enforcement.
Source: CFTC.gov
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