Washington, D.C. – Swapnil Rege, a former portfolio manager for a Connecticut-based hedge fund, has been penalized by the Commodity Futures Trading Commission (CFTC) for a fraudulent scheme to artificially inflate trading profits. The CFTC issued an order detailing charges against Rege for mismarking swap valuations to secure a larger performance bonus.
The order requires Rege to pay a $100,000 civil monetary penalty and disgorge $600,000 in performance bonuses, plus $49,170.84 in pre-judgment interest. He is also banned from trading on any CFTC-registered exchange and prohibited from seeking registration with the CFTC for a minimum of three years. The fraudulent activity occurred between approximately June 2016 and April 2017.
According to the CFTC, Rege manipulated the valuation model used by his employer, a commodity pool operator, to misrepresent the profitability of trades. This involved altering discount curve settings and using incorrect day count conventions for swap and swaption calculations. He allegedly sought verification of these fraudulent valuations from counterpart traders at swap dealers.
“With this action, the Commission shows its continued commitment to holding accountable individuals who engage in fraudulent conduct that undermines the integrity of our markets,” said James McDonald, CFTC’s Director of Enforcement. “This Order also reflects the CFTC’s continued commitment to working in parallel with our enforcement partners like the Securities and Exchange Commission to ensure that bad actors are identified and held accountable, even when their misconduct stretches across multiple regulators’ jurisdictions.”
The Securities and Exchange Commission (SEC) also announced a parallel action against Rege for aiding and abetting violations of the Investment Advisers Act. The SEC order mirrors the CFTC’s requirements for disgorgement and penalties, with provisions for offsetting payments between the two agencies. The CFTC acknowledged assistance from the SEC Division of Enforcement and the National Futures Association in the investigation.
The CFTC’s case was led by staff members Matthew B. Rowland, Trevor Kokal, John Buffington, Patryk J. Chudy, Lenel Hickson, Jr., and Manal M. Sultan.
Source: CFTC.gov
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