The Commodity Futures Trading Commission (CFTC) has issued Orders against Adam Flavin and Peter Grady, traders at a commodity merchandising firm, filing and settling charges of attempted manipulation of the price of certain wheat futures and options contracts that were traded on the Chicago Board of Trade (CBOT).
James McDonald (pictured), CFTC Director of Enforcement, says: “This case shows the CFTC’s commitment to holding individual wrongdoers accountable for their misconduct. As this investigation shows, we will not stop at corporate charges but will work vigorously to ensure the individuals who carried out the wrongful acts are held accountable as well.”
Flavin’s Order requires him to pay a USD125,000 civil monetary penalty (CMP) and Grady’s Order requires him to pay a USD250,000 CMP. Further, Flavin’s Order finds that for four years, and Grady’s Order finds that for nine months, each is prohibited, from the date of their respective Orders, from entering into any transactions involving commodity interests; having any commodity interests traded on his behalf; controlling or directing the trading for or on behalf of any other person or entity in any account involving commodity interests; or soliciting, receiving, or accepting any funds from any person for the purpose of purchasing or selling any commodity interests.
The two Orders also require Flavin and Grady to cease and desist from further violations of the Commodity Exchange Act, as charged.
According to the Order, Flavin was a Kansas resident and an employee at the commodity merchandising firm responsible for buying and selling physical wheat and trading CBOT wheat futures contracts for both hedging and speculative purposes. According to the Order, Grady was a Colorado resident and an employee at a subsidiary of the commodity merchandising firm and was responsible for trading CBOT wheat futures contracts and options for speculative purposes. Grady also communicated regularly with employees of the commodity merchandising firm who traded physical wheat.
Both Flavin and Grady’s Orders further find that from at least 3 March to 11 March 2015, the pair, while acting with others, coordinated and executed a strategy to attempt to manipulate the price of certain wheat futures and options contracts that were traded on the CBOT. This strategy, according to each Order, centred on acquiring and loading-out for delivery, by train or barge, wheat with three parts per million deoxynivalenol (3 ppm Vomitoxin) through the purchase and cancellation of 250 wheat shipping certificates (Wheat Certificates). Through the cancellation of these Wheat Certificates, they intended to send a false or misleading signal to the market of a demand for 3 ppm Vomitoxin wheat in order to increase the value of certain wheat spread and options.
