WASHINGTON, D.C. – Commodity futures traders Kevin McLaren and Edward Gorman were slapped with $400,000 in penalties and trading bans by the Commodity Futures Trading Commission (CFTC) for engaging in unlawful wash sales, the agency announced on April 29, 2013.
The CFTC order details that McLaren and Gorman executed a series of prearranged trades in March 2010 involving corn futures spread contracts on the Chicago Mercantile Exchange. These trades, executed opposite each other with identical quantities, prices, and contract months, were deemed “wash sales” – noncompetitive trades designed to create the illusion of activity without genuine market risk.
According to the CFTC, the men intentionally engaged in these trades to negate any potential risk, effectively avoiding legitimate market transactions. Each trader will be assessed a $200,000 civil monetary penalty. In addition to the financial penalties, both McLaren and Gorman are subject to 140-day trading bans, preventing them from participating in any CFTC-regulated markets during that period.
The CFTC also ordered McLaren and Gorman to cease and desist from any further violations of the Commodity Exchange Act and related Commission Regulations. The charges stem from violations of Section 4c(a) of the Commodity Exchange Act and Commission Regulation 1.38(a).
The case was led by CFTC Division of Enforcement staff members John Einstman, Michael Loconte, Paul G. Hayeck, and Joan M. Manley, with assistance from Anthony W. Saldukas of the Division of Market Oversight.
Source: CFTC.gov
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