Stamford, Connecticut-based commodities merchant Freepoint Commodities LLC will pay over $91 million in penalties and disgorgement to settle charges of misappropriation-based fraud brought by the Commodity Futures Trading Commission (CFTC). The agency alleges that Freepoint engaged in a scheme from 2012 to 2018 to illegally obtain material non-public information from a South American state-owned enterprise (SOE) related to fuel oil trading.
The CFTC’s order details how Freepoint improperly obtained confidential information, including the SOE’s oil production and shipping plans, and bids submitted by competitors. This was allegedly achieved through millions of dollars in bribes paid to employees and agents of the SOE via an intermediary. Freepoint then used this inside information to purchase fuel oil, gaining an unfair advantage in the market.
According to the CFTC, Freepoint’s actions violated the Commodity Exchange Act (CEA) and undermined the integrity of both U.S. and global oil markets. The company reportedly secured over $30 million in improper gains through the scheme. Traders at Freepoint were aware the information was obtained through bribery and actively concealed the fraud using coded language, aliases, and private email accounts.
In a parallel action, the Department of Justice (DOJ) entered into a deferred prosecution agreement (DPA) with Freepoint, deferring criminal prosecution on a charge of conspiracy to violate the Foreign Corrupt Practices Act. Under the terms of the DPA, Freepoint agreed to pay a criminal penalty and forfeiture, a portion of which will be offset against the CFTC settlement.
“Misappropriation in the oil and gas markets harms not only physical and related derivative market participants, but the integrity of these markets,” stated Ian McGinley, Director of Enforcement at the CFTC. “As demonstrated today, the CFTC uses its authority under the CEA to ensure that the market is not influenced by whichever company is willing to pay the biggest bribes.”
The investigation was conducted by Ben Sedrish, Heather Dasso, Matthew Edelstein, Allison V. Passman, Margaret Aisenbrey, Gates Hurand, Scott Williamson, and Robert Howell of the CFTC’s Division of Enforcement, with assistance from the Corruption and Insider Trading Task Forces.
Source: CFTC.gov
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