Court fines Ill. trader $6.6 million for cheating customers

February 26, 2012 06:00 PM

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order requiring former Chicago Board of Trade (CBOT) floor trader and registered floor broker David Sklena of Skokie, Ill., to pay a disgorgement and civil monetary penalty of $6,608,750 for aiding and abetting another trader’s scheme to cheat customers who placed orders in Five-Year Treasury Note futures contracts.

The court’s order, entered Feb. 10, 2012, by Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois, stems from a CFTC complaint filed in January 2008, charging Sklena with fraud and non-competitive trading (see CFTC Press Release 5434-08, January 10, 2008).

The order requires Sklena to pay a $4,956,562.50 civil monetary penalty and disgorgement of $1,652,187.50. The order also permanently prohibits Sklena from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC.

Judge Kendall found that on April 2, 2004, a floor trader sold 2,274 Five-Year Treasury Note futures contracts on behalf of his customers to Sklena at an arranged price that was much lower than the market price at the time of the trade in a manner that was not executed openly and competitively as required by CFTC and CBOT rules. Following this noncompetitive purchase, Sklena immediately sold 485 of the contracts back to the other trader in another noncompetitive trade and sold the remaining 1,789 (2,274 minus 485) futures contracts on the CBOT’s electronic trading platform at the prevailing, higher market price, realizing a personal gain of approximately $1.65 million. The court found that, overall, the two traders’ non-competitive trading resulted in profits to them. Moreover, the court concluded that the other trader’s customers were “disadvantaged to the tune of $2,048,781.”

The CFTC staff members responsible for this case are Camille Arnold, Judy McCorkle, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

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