Staten Island resident Michael Pucciarelli and his company, Badge Trading LLC, have been slapped with a $280,000 penalty and a four-year trading ban by the Commodity Futures Trading Commission (CFTC) for manipulative trading practices. The CFTC issued an order on April 5, 2016, detailing the charges and settlement.
The investigation revealed that between January 2010 and August 2012, Pucciarelli, while employed as a purchasing director for a coffee roasting business, used Badge Trading to illegally manipulate “exchange for physicals” (EFP) transactions on ICE Futures U.S. and ICE Clear U.S. These EFPs, designed to allow for the physical delivery of a commodity alongside a futures contract, were found to be “non-bona fide” – lacking the required corresponding cash positions.
Pucciarelli allegedly substituted Badge Trading into the futures leg of legitimate coffee bean purchase transactions made on behalf of his employer. This allowed Badge Trading to secure more favorable pricing on its own futures trades, effectively giving the company an unfair advantage. The practice violated both CFTC regulations and ICE’s specific rules regarding EFPs, which require a direct relationship between the buyer/seller of the physical commodity and the buyer/seller of the futures contract.
According to the CFTC, the unlawful EFPs constituted “fictitious sales” and resulted in the reporting of inaccurate prices, violating Section 4c(a) of the Commodity Exchange Act (CEA) and CFTC Regulation 1.38(a). The Order mandates that Pucciarelli and Badge Trading jointly pay the $280,000 penalty and are prohibited from trading or registering with the CFTC for four years. They are also required to cease and desist from any further violations of the CEA and related regulations.
The CFTC acknowledged the cooperation of ICE Futures U.S., Inc. in the investigation. The case was led by CFTC staff members Gates S. Hurand, Trevor S. Kokal, Michael P. Geiser, K. Brent Tomer, Lenel Hickson Jr., and Manal M. Sultan.
Source: CFTC.gov
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