Steven Karvellas and Thomas Maloney, both New Jersey-based brokers, have been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for fraudulently allocating profitable trades to their personal accounts, depriving customers of potential earnings. The CFTC announced the settlements on April 8, 2008.
Karvellas, of Allendale, NJ, and Maloney, of Springfield, NJ, were charged with diverting transactions filled for customers to their own accounts. Karvellas, a former board member of the New York Mercantile Exchange (NYMEX) and registered floor broker, also allegedly ordered the destruction of an order ticket to conceal his actions. Both men are registered floor brokers.
The CFTC’s action stemmed from a joint investigation with the New York County District Attorney’s Office (NYCDAO). The investigation revealed both brokers engaged in a scheme to prioritize their own profits over those of their clients.
As a result of the CFTC orders, Karvellas will pay a $375,000 civil monetary penalty and is permanently barred from trading commodities contracts and registering with the CFTC. Maloney will pay a $62,500 civil monetary penalty and is also permanently banned from trading and registration.
In addition to the CFTC penalties, both men faced criminal charges from the NYCDAO. Maloney pled guilty and was promised a sentence of five years probation and a $75,000 fine. Karvellas also pled guilty and was promised five months of incarceration and a $475,000 fine.
“As today’s actions show, civil and criminal agencies achieve powerful results when they work together to stamp out fraud,” said CFTC Acting Chairman Walter Lukken. Gregory G. Mocek, CFTC Enforcement Director, added that the cases demonstrate the CFTC’s commitment to eradicating fraud in the futures markets.
The CFTC investigation remains ongoing.
Source: CFTC.gov
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