New York, NY – November 13, 2009 – The U.S. Commodity Futures Trading Commission (CFTC) announced charges and a settlement against EMF Financial Products, LLC (EMF) for making false statements and failing to disclose crucial information regarding its market positions and financing to the Chicago Board of Trade (CBOT). The firm, a CFTC registrant based in New York, was also cited for failing to adequately supervise its commodity interest business.
The CFTC order mandates EMF to pay a $4 million civil monetary penalty and restricts its registration as a Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA) for three years. The violations stem from actions taken in August 2005, concerning the September 2005 U.S. Treasury Note Futures Contract.
According to the CFTC, EMF concealed and misrepresented material information about its positions and financing while the CBOT was monitoring the expiring September 2005 contract. Prior to the delivery period, EMF misrepresented its full position and control of up to $11.9 billion of the underlying “cheapest-to-deliver” (CTD) security, all while maintaining a substantial long position in the September 2005 contract.
The CBOT conducted market surveillance to ensure an orderly liquidation of the September 2005 Contract. When contacted by the CBOT regarding its delivery intentions and market positions, EMF provided inaccurate information. In one instance, EMF claimed a $200 million cash position in the CTD when it actually held $2.2 billion. Furthermore, EMF failed to disclose its substantial $10 billion-plus position in the CTD within the repurchase (repo) market.
The CFTC found that EMF did not inform the CBOT it was financing its position through General Collateral Financing (GCF), effectively limiting the availability of those notes to other market participants. Full disclosure of its CTD position only occurred after a formal written request from the CBOT. The CBOT then directed EMF not to increase its position and to ensure sufficient supply of the CTD.
The order also states that EMF lacked adequate internal controls and supervisory systems to prevent and detect potential misconduct. Specifically, the firm did not have appropriate procedures in place to manage and oversee the large, concentrated positions taken by its traders, nor policies to monitor communications.
Source: CFTC.gov
Related Federal Cases
- Wall Street Firms, Financial Malfeasance, New York NY, 2023 · New York
- OneMain Financial, Debt Trap Scheme, New York NY, 2023 · New York
- Aleena Cosmetics, Selling Mercury-Laced Beauty Products, New York 2023 · New York
- Christopher Ferguson, PPE Scam, New York NY, 2023 · Texas
- Christopher Ferguson, Scheme to Inflate Order Numbers, New York 2023 · New York
MORE FEDERAL CRIME NEWS
US NewsUS NewsUS NewsUS News