Washington, D.C. – United States Commodity Funds LLC (U.S. Commodity Funds) has been slapped with a $2.5 million penalty by the Commodity Futures Trading Commission (CFTC) for failing to adequately disclose position limits impacting its United States Oil Fund, LP (USO) commodity pool. The CFTC simultaneously filed and settled charges against the registered commodity pool operator on Monday, November 8, 2021.
The order requires U.S. Commodity Funds to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations. According to the CFTC, between April 22, 2020, and June 12, 2020, U.S. Commodity Funds did not fully inform investors that USO’s futures commission merchant had placed restrictions on its ability to purchase additional futures contracts. These limits would prevent the fund from acquiring more contracts needed for a planned offering of new exchange-traded fund shares.
“Complete, timely, and accurate disclosure to commodity pool participants is a fundamental obligation for a CPO under the CEA,” stated Acting Director of Enforcement Vincent McGonagle. “As demonstrated by today’s action, we and our regulatory partners will aggressively pursue those who do not meet their disclosure obligations.”
The CFTC determined this lack of disclosure constituted a fraud against commodity pool participants. In a related civil action, the Securities and Exchange Commission (SEC) also filed and settled charges against U.S. Commodity Funds and USO, with a combined penalty of $2.5 million to be split between both agencies. The CFTC order will recognize and offset any payments made to the SEC, ensuring no double-penalization.
The investigation was conducted by Alejandra de Urioste, Lara Turcik, Trevor Kokal, K. Brent Tomer, Lenel Hickson Jr., and Manal M. Sultan of the CFTC’s Division of Enforcement. The CFTC acknowledged the assistance of the SEC in the matter.
Source: CFTC.gov
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