Yumin Li settled a disciplinary action brought by the Chicago Mercantile Exchange for engaging in multiple round turn transactions between an account of her employer, Tanius Technology LLC, and an account of Kering Capital Ltd.—a company formed by Ms. Li’s mother—causing the Kering account to profit and the Tanius account to sustain losses in an equivalent amount. The alleged trading occurred from March 17, 2015, through May 6, 2015, and was previously the subject of an enforcement action by the Commodity Futures Trading Commission against Ms. Li and Kering. (Click here for background in the article “Mom’s Company Was Beneficiary of Illicit Money Pass Using Noncompetitive Trades Rules Court in CFTC Lawsuit” in the December 18, 2016 edition of Bridging the Week.)
To resolve the CME’s disciplinary action, Ms. Li agreed to serve a six-year all CME Group exchanges access prohibition, as well as other penalties. In the CFTC enforcement action, the US federal court in Illinois hearing the matter ordered disgorgement of US $300,462 by Kering, and a civil penalty of $901,387 jointly and severally against Ms. Li and Kering. Ms. Li was also subjected to a five-year trading ban. Ms. Li was not a member of the CME at the relevant time.
Separately, Marc Michelotti agreed to pay an aggregate fine of US $80,000 and disgorge profits of US $11,900 to resolve three separate disciplinary actions by CME, the Chicago Board of Trade and the New York Mercantile Exchange. The exchanges alleged that, at various times from January 2015 through January 2016, Mr. Michelotti entered and cancelled orders in Lumber, Rough Rice, Oats and RBOB Gasoline futures contracts without the intent to trade. The exchanges claimed that Mr. Michelotti entered multiple one-lot orders on one side of the market to narrow the prevailing bid/ask spread and create the appearance of an imbalance in buy/sell pressure. As other traders joined the market on the side of the one-lot orders, Mr. Michelotti would enter an aggressive order on the other side of the market that would take out traders who had joined the side of his one-lot orders. Mr. Michelotti would then cancel his resting one-lot orders, claimed the exchanges. The exchanges alleged that Mr. Michelotti’s conduct violated CME Group’s prohibition against disruptive trading practices. (Click here to access CME Group Rule 575A.)
Andrey Skripko agreed to pay a fine of US $45,000 and serve a 10-business-day all CME Group exchanges trading suspension to settle disciplinary action brought by the Commodity Exchange, Inc. for entering large orders on one side of the silver and gold futures markets in order to obtain fills on smaller resting orders on the other side. Comex claimed that Mr. Skripko’s alleged wrongful trading occurred on multiple occasions in September 2016. Relatedly, RWE Supply & Trading GMBH—Mr. Skripko’s employer—agreed to settle a separate disciplinary action brought by COMEX related to Mr. Skripko’s conduct by disgorging profits of US $18, 841. Comex charged that RWE was strictly liable for Mr. Skripko’s conduct.
Finally, J&P Capital Management Co., Ltd, agreed to pay an aggregate fine of US $75,000 to resolve disciplinary actions brought by CME and Comex. The exchanges alleged that on various dates from December 2015 through February 2016, two J&P Capital employees engaged in matching buy and sell orders of various futures contracts in accounts over which the firm maintained ownership and control for the purpose of liquidating open positions to avoid delivery. The two employees—Jia Wang and Jiayi Lu—also each agreed to pay total fines of US $10,000 and to serve a 10-business-day all CME Group exchanges trading suspension to resolve parallel disciplinary actions brought against them.
Compliance Weeds: The Yumin Li fact pattern resonates with similarity to two recent enforcement actions by the Commodity Futures Trading Commission charging persons with insider trading for misappropriating trading information. In the first action brought in 2015, the CFTC alleged that Arya Motazedi, a gasoline trader for a large publicly traded corporation, similarly misappropriated trading information of his employer for his own benefit. In the second action, the CFTC brought and settled charges against Jon Ruggles, a former trader for Delta Airlines, for trading accounts in his wife’s name based on his knowledge of trades he anticipated placing for his employer. Both actions were grounded in a provision of law under the Dodd-Frank Wall Street Reform and Consumer Protection Act and a CFTC rule that prohibit use of a manipulative or deceptive device or contrivance in connection with futures or swaps trading. (Click here to access Commodity Exchange Act Section 6(c)(1), US Code § 9(1), and here to access CFTC Rule 180.1. Click here for background on these CFTC enforcement actions in the article “Ex-Airline Employee Sued by CFTC for Insider Trading of Futures Based on Misappropriated Information” in the October 2, 2016 edition of Bridging the Week.)