Michael Moster, a former trader for Bank of America in Chicago, has been ordered to pay a $360,000 civil penalty for falsely reporting trades to his employer, according to a settlement with the U.S. Commodity Futures Trading Commission (CFTC). The order, issued February 11, 2009, details how Moster concealed risk associated with unauthorized Treasury bond positions he took in January 2004.
The CFTC found that Moster falsely reported purchasing 4,000 Treasury futures contracts. This misrepresentation was an attempt to create the illusion of a hedge against the risk stemming from his large, unauthorized Treasury bond positions. By the following week, these fictitious trades artificially inflated the value of his trading book by over $12 million.
Ultimately, the sale of Moster’s unauthorized Treasury bond position resulted in a loss of approximately $12.2 million to Bank of America. The CFTC’s penalty is contingent on Moster first fulfilling his restitution obligations stemming from a related criminal case.
On September 18, 2008, Moster pled guilty to one count of making false entries into the books and records of a bank in the Southern District of New York. As part of the criminal sentencing, he is required to make full restitution for the $12 million loss caused to Bank of America. The CFTC’s order acknowledges the restitution and stipulates that it must be completed before the civil monetary penalty is paid.
The case was handled by CFTC staff members Ken Koh, Todd Kelly, Peter Haas, Paul Hayeck, and Joan Manley.
Source: CFTC.gov
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