Energy Trader Settles CFTC Charges for Kickback Scheme

A former natural gas trader settled CFTC charges for participating in a fraudulent scheme to misappropriate confidential employer information and for accepting illicit payments in exchange for steering brokerage business.

According to a Consent Order from the U.S. District Court for the Southern District of Texas, the trader intentionally breached his duties to his employer by disclosing confidential details regarding block trade orders to a broker and a pre-arranged counterparty. The CFTC alleged that the trader's misuse of proprietary information allowed the counterparty to "obtain advantageous prices" while eliminating "competition and market risk," resulting in the execution of fictitious trades. Further, the CFTC claimed the trader concealed over $5.5 million in kickbacks routed through family members and shell companies and made false statements to federal investigators during an interview.

The CFTC charged the trader with violating CEA Sections 4b ("Contracts designed to defraud or mislead"), 4c ("Prohibited transactions"), 6(c) ("Prohibition regarding manipulation and false information"), 9 ("Violations generally; punishment; costs of prosecution"), as well as CFTC Regulation 180.1 ("Prohibition on the employment, or attempted employment, of manipulative and deceptive devices").

To settle the charges, the Court ordered: (i) a permanent ban on trading in commodity interests and on registering with the Commission; and (ii) required the trader to pay $7,709,509 in restitution to the former employer; and (iii) payment of $6,532,360 in disgorgement of ill-gotten gains.