U.S. District Court Enters Order of Injunction against Cash Management Group Executive

The U.S. District Court for the Northern District of Illinois banned permanently the CEO and President of a cash management group from trading commodity interests for others and from registration with the CFTC. The Order resolves charges alleging violations of CEA Section 4d(b) (Dealing by Unregistered Futures Commission Merchants or Introducing Brokers Prohibited; Duties in Handling Customer Receipts; Rules to Avoid Duplicative Regulations) in the handling of $562 million in commodity customer segregated funds that had been managed by the group. The Order stems from a CFTC Complaint filed in 2008.

In its 2008 Complaint, the CFTC alleged that the CEO and President (i) commingled and misappropriated commodity customer funds that were received by the group from various FCMs to finance its own proprietary trading, (ii) failed to treat and deal with customer funds as belonging to the commodity customers, and (iii) withdrew customer-segregated funds beyond the group's actual interest therein and used them to collateralize its overnight loan with the Bank of New York in violation of CEA Section 4d(b).

The Order banned the CEO and President permanently from trading commodity interests for others and from registration with the CFTC, and prohibited him from violating a CEA's duties in the future when handling customer receipts.