In an order dated July 17, the U.S. District Court for the Northern District of Illinois dismissed Lawrence-Bonfitto Trading Company (Lawrence-Bonfitto) and its principal, Joseph J. Bonfitto, who had been named as nominal defendants in the Commodity Futures Trading Commission’s enforcement action against Edward Sarvey and David G. Sklena. Lawrence-Bonfitto had been Sklena’s clearing firm at the time of the alleged wrongdoing, which involved a series of non-competitive trades at the Chicago Board of Trade (CBOT) that resulted in approximately $1.65 million in profits for Sklena. The CFTC had named the Bonfitto parties as “nominal defendants,” on the theory that they held a portion of the proceeds from Sklena’s non-competitive trading, but had no legitimate ownership interest therein.
The Bonfitto parties successfully argued that the CFTC had not established that they had no ownership interest in the retained proceeds from Sklena’s trading, noting that Sklena’s trades were made in contravention of the clearing firm’s instructions to Sklena to reduce his positions. The Bonfitto parties further noted that the disputed amounts had been the subject of a CBOT arbitration proceeding between Sklena and Lawrence-Bonfitto, which resulted in Lawrence-Bonfitto being permitted to retain over $800,000 of the funds in Sklena’s account.
The court expressed no opinion as to the relative priority between the claims of Bonfitto parties and the CFTC to the proceeds from Sklena’s trades, or as to whether the Bonfitto parties could be properly named as full defendants in the case. (U.S. Commodity Futures Trading Commission v. Sarvey, 2008 WL 2788538 (N.D. Ill. July 17, 2008))