Chicago trader Thomas C. Lindstrom is facing charges of fraud following a complaint filed by the U.S. Commodity Futures Trading Commission (CFTC). The civil enforcement action, filed in the U.S. District Court for the Northern District of Illinois on September 29, 2016, alleges Lindstrom defrauded his employer, Rock Capital Markets, LLC, out of $285,000 and caused over $13.9 million in losses, ultimately leading to the firm’s collapse in early 2015.
Lindstrom, a registered CFTC floor broker and member of the Chicago Board of Trade (CBOT) since 1993, allegedly exploited a pricing convention regarding out-of-the-money options on 10-year U.S. Treasury note futures. From January 1, 2014, to January 27, 2015, he is accused of acquiring hundreds of thousands of deep out-of-the-money options – virtually guaranteed to expire worthless – which settled daily at a minimum tick value of $15.625. This generated false profits in his trading account.
The CFTC alleges Lindstrom concealed the true nature of his position from Rock Capital by submitting doctored screenshots of his trading software, omitting his massive holdings in these near-worthless options. He then allegedly drew $285,000 from the firm based on these fabricated profits, exceeding his $500,000 margin limit by millions. By the time his scheme was discovered on January 27, 2015, Lindstrom had accumulated over 950,000 of these options, controlling nearly all open interest in at least ten T-Note option contracts.
The complaint further states that Lindstrom’s account was inflated by more than $15 million when the fraud was uncovered, just days before he was set to receive an additional payment exceeding $500,000. The CFTC is seeking full restitution, disgorgement of ill-gotten gains, a civil monetary penalty, and a permanent ban on Lindstrom’s registration. The investigation remains ongoing.
Source: CFTC.gov
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