On Thursday, the U.S. Commodity Futures Trading Commission (CFTC), the independent agency that regulates futures and option markets, announced that it obtained a federal court consent order requiring defendants Matthew J. Marcus his company Tech Power Inc to pay a $250,000 civil monetary penalty, according to a CFTC statement.
The U.S. derivatives regulator alleged that Matthew J. Marcus of California and his company Tech Power Inc., a Nevada corporation located in California, had engaged in fictitious single stock futures transactions and trading non-competitively on OneChicago LLC (OneChicago), an electronic futures exchange in Chicago, Illinois.
On June 30, 2016, Judge Milton I. Shadur of the U.S. District Court for the Northern District of Illinois entered a Consent Order requiring Marcus and Tech Power jointly to pay a $250,000 civil monetary penalty.
In addition to the fiscal penalties, the court’s order, which stems from a CFTC complaint originally filed in on April 2015, also imposes permanent trading, solicitation and registration bans against Marcus for a period of 5 years, and prohibits the two parties involved from violating of the Commodity Exchange Act and CFTC Regulations, as charged.
The start date of the regulatory actions is noteworthy, as it could be seen as a reminder that such investigations often take some time, and that CFTC is not afraid of looking back in time to find violations.
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Money Pass Scheme
More specifically, the CFTC alleged in its complaint that Marcus, with the help of John D. Briner, a disbarred Canadian attorney, carried out a scheme commonly known as a ‘money pass’ from January 28, 2014 to February 5, 2014. Over seven trading days, Briner provided Marcus, his former client, with his unique password and login information and informally authorized him to enter trades in an account carried in the name of MetroWest Law Corporation (MetroWest), a Canadian law firm.
This way, the defendants moved money from the MetroWest account to Tech Power, through a series of 1,248 pre-arranged, non-competitive trades using single stock futures contracts on OneChicago.
The Order further states that Marcus placed in the two accounts nearly simultaneous and matching orders on eight illiquid single stock futures products, which overall resulted in the unlawful transfer of $390,000 from MetroWest to Tech Power.
According to the official announcement, the CFTC appreciates the assistance of the British Columbia Securities Commission, and confirmed that it will continue its litigation against the involved Canadian defendants, Briner and MetroWest.
The U.S. regulator has been actively targeting firms and individuals involved in the illegal trading and fraudulent activity. The watchdog has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.