CFTC sanctions two Ill. residents for wash trades

Washington, DC – The Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against Kevin McLaren and Edward Gorman for engaging in unlawful wash sales in corn futures spread contracts on the Chicago Mercantile Exchange in March 2010.  The order imposes a $200,000 civil monetary penalty each on McLaren and Gorman, who were also ordered to cease and desist from future violations of Section 4c(a) of the Commodity Exchange Act, 7 U.S.C. § 6c(a) (2006), and Commission Regulation 1.38(a), 17 C.F.R. § 1.38(a) (2012).  McLaren and Gorman were also ordered to submit to 140-day trading bans.

According to the order, on several occasions in March 2010, McLaren and Gorman intentionally engaged in a number of prearranged calendar spread trades in spot month corn futures for the same quantity, price, and contract month.  In each instance, McLaren and Gorman executed the orders opposite each other.  The order finds that because the trades were intended to negate market risk and avoid bona fide market transactions, they constituted noncompetitive “wash sales.”

The CFTC Division of Enforcement staff members responsible for this case are John Einstman, Michael Loconte, Paul G. Hayeck, and Joan M. Manley.  The Division appreciates the assistance of Anthony W. Saldukas of the CFTC Division of Market Oversight.

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