Chicago, IL – January 10, 2008 – Two Chicago Board of Trade (CBOT) floor brokers are facing fraud charges following a U.S. Commodity Futures Trading Commission (CFTC) investigation, announced today. Edward C. Sarvey of Lemont, Illinois, and David G. Sklena of Chicago, are accused of manipulating trades in the Five-Year Treasury Note futures pit on April 2, 2004.
The CFTC complaint, filed in the U.S. District Court for the Northern District of Illinois, details how Sarvey allegedly exploited the market volatility immediately following the release of the March 2004 employment statistics. The unexpectedly high job numbers caused a rapid price drop in Five-Year Treasury Note futures contracts – a loss of over $1,656.25 per contract – within 90 seconds.
According to the complaint, Sarvey held 2,474 customer orders to sell futures contracts. When prices briefly recovered, instead of executing those orders at the higher market price, Sarvey allegedly sold 2,274 contracts to Sklena at a significantly lower price established minutes earlier. This action allegedly cheated Sarvey’s customers out of as much as $2.1 million.
The CFTC also alleges Sarvey profited personally from the scheme by simultaneously purchasing 485 contracts from Sklena at the lower price and immediately reselling them for a profit of over $357,000. Sklena is accused of knowingly aiding and abetting Sarvey’s fraudulent activity.
Sklena, who reportedly began the trading day with less than $25,000 in his account, allegedly profited approximately $1.65 million from the arrangement, at the expense of Sarvey’s customers. The complaint also names Lawrence-Bonfitto Trading Company and its principal, Joseph Bonfitto, as relief defendants, alleging they improperly received approximately $650,000 of Sklena’s profits.
The CFTC is seeking preliminary and permanent injunctions against Sarvey and Sklena, as well as restitution for defrauded customers and civil monetary penalties. The commission is also pursuing the disgorgement of ill-gotten gains from Sarvey, Sklena, Lawrence-Bonfitto Trading Company, and Joseph Bonfitto. The CME Group, Inc. assisted the CFTC in this investigation.
Source: CFTC.gov
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