John Aaron Brooks, of Houston, Texas, has been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for defrauding Citigroup, Inc. and Citigroup Energy, Inc. through the manipulation of ethanol futures contracts. The judgment, entered by Judge Kimba M. Wood of the U.S. District Court for the Southern District of New York on August 1, 2014, stems from a complaint filed by the CFTC on September 27, 2013.
The court order requires Brooks to pay a $500,000 civil monetary penalty. Furthermore, Brooks is permanently banned from registering with the CFTC and is prohibited from trading any CFTC-regulated products for others for seven years. He is also barred from trading, or having others trade, ethanol futures on his behalf for five years. The order permanently enjoins Brooks from violating the Commodity Exchange Act (CEA) and a related CFTC regulation.
Between November 2010 and October 2011, Brooks worked as a Director in Citigroup’s commodities business. During this period, the CFTC found that Brooks inflated and falsely reported the value of his position in New York Mercantile Exchange (NYMEX) Chicago Ethanol (Platts) Futures contracts within Citi’s proprietary account. He misrepresented his profits and losses and concealed losses by offsetting them with other futures positions.
According to the Order, Brooks knowingly entered false values for the NYMEX ethanol futures into Citi’s computer system at the end of each trading day. The total losses incurred by Citi as a direct result of Brooks’s fraudulent mismarking totaled approximately $42.4 million. The CFTC charged Brooks with employing manipulative practices, cheating, defrauding, and concealing trading losses, all in violation of the CEA and CFTC regulations.
The case was led by CFTC staff members Janine Gargiulo, Michael Geiser, Trevor Kokal, David Acevedo, Lenel Hickson, and Manal Sultan.
Source: CFTC.gov
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