Donald A. Newell, 51, of Glenview, Illinois, is facing federal charges of trade allocation fraud following a civil enforcement action filed by the U.S. Commodity Futures Trading Commission (CFTC) on August 23, 2012. The complaint, filed in the U.S. District Court for the Northern District of Illinois, alleges Newell fraudulently allocated commodity futures and options trades to benefit a corporate proprietary account owned by his company, Quiddity, LLC, at the expense of customer accounts.
According to the CFTC, Newell, who owns and controls Quiddity and is a registered Associated Person, implemented the scheme between October 15, 2008, and March 19, 2009. The fraudulent allocation of profitable trades allegedly netted over $1.1 million for the proprietary account, directly harming Quiddity’s customers. The CFTC also alleges that Newell and Quiddity failed to maintain required records and that Newell knowingly made false statements during investigative testimony in September and October 2011.
The complaint details a practice where Quiddity, under Newell’s direction, would place orders with Futures Commission Merchants without initially specifying the account to which the trades should be allocated. The defendants allegedly waited to observe the profitability of the trades before assigning them, with approximately 85% of the trades allocated to the proprietary account post-execution proving profitable. Newell is accused of falsely testifying to the CFTC that he consistently provided account numbers at the time of order placement.
Furthermore, the CFTC alleges that Quiddity failed to retain adequate records to demonstrate fair and equitable trade allocations, hindering the ability to reconstruct the order handling process as mandated by CFTC regulations. The agency is seeking restitution for defrauded customers, the return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions to prevent further violations of federal commodities laws. The National Futures Association provided assistance in the investigation.
Source: CFTC.gov
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