As alleged by the CFTC, on or about Aug. 14, 2012, the CFTC’s Division of Enforcement, as part of an ongoing investigation, issued a subpoena to Cognata for the production of documents, including trading cards, order tickets, and other documents relating to his trading of gold or silver futures or options on futures, which were required to be made, kept and produced by floor brokers pursuant to the CEA and CFTC Regulations. .To date, Cognata has failed to produce any documents in response to the subpoena. As a result of Cognata’s violations, the CFTC is seeking a civil monetary penalty and an order that Cognata cease and desist from violating the provisions of the CEA and CFTC Regulations, as charged.
The CFTC is seeking the revocation of Cognata’s registration as a floor broker for “good cause.” It is alleged that the facts constituting “good cause” include, in addition to Cognata’s failure to produce records to the CFTC, the settlements and findings in two exchange disciplinary actions against Cognata since 2011. In one exchange disciplinary action, pursuant to an offer of settlement, a panel of the COMEX Business Conduct Committee (the Panel) found that on various dates from October through December 2008, Cognata engaged in noncompetitive, prearranged trades of silver and gold options. In the other exchange disciplinary action, pursuant to an offer of settlement, the Panel found that on three occasions in June and July 2011, Cognata prearranged trades in silver options for the purpose of receiving money passes from other COMEX members. In both disciplinary actions, Cognata neither admitted nor denied any rule violations in his offers of settlement.
TOTE Fund, MJS Capital Management and Michael J. Siegel with commodity pool fraud
The CFTC filed a civil enforcement action in the U.S. District Court for the District of New Jersey, charging two California firms, TOTE Fund LLC and MJS Capital Management LLC, and their principal, Michael J. Siegel of Northfield, NJ, with misappropriating funds in connection with two commodity pools.
Allegedly, from August 2007 through at least October 2010, TOTE, MJS, and Siegel, operated two commodity pools, the Monarch Futures Fund LLC and the QEP Futures Fund LLC. Pool participants placed approximately $1.375 million in the QEP and Monarch pools.
The CFTC further alleges that, from at least January 2008 through at least October 2010, the defendants misappropriated funds totaling approximately $191,689 from Monarch and QEP pool participants by withdrawing money from the pools for non-pool expenses and taking fees to which they were not entitled. As alleged in the complaint, despite earning incentive, management, and administrative fees of approximately $319,909 based on his trading for Monarch and QEP, Siegel transferred approximately $511,598 from bank accounts in the names of Monarch, QEP, and TOTE to his personal bank accounts, to a credit card account, and to at least one individual. Siegel used some of these funds to pay personal expenses, and MJS and Siegel also misappropriated funds by failing to return funds to at least two pool participants.
As further alleged, TOTE, acting through Siegel, also failed to provide Monarch pool participants with copies of monthly statements received by TOTE from FCMs.
CFTC charges ethanol trader John Aaron Brooks with fraud
The CFTC filed a civil injunctive enforcement action charging John Aaron Brooks with defrauding an affiliate of a large commercial bank where he then worked by scheming to conceal trading losses from the bank and its affiliate. As alleged in the CFTC’s complaint, Brooks effectuated his scheme by inflating the value of New York Mercantile Exchange Chicago Ethanol (Platts) futures contracts to conceal trading losses he was incurring. The losses concealed ultimately grew to cause the bank and its affiliate to suffer over $40 million in realized losses before Brooks’s fraud was detected, leading to his termination. Brooks resides in Houston, Texas.
The CFTC’s civil complaint, filed Sept. 27, 2013, in the U.S. District Court for the Southern District of New York, alleges that for the majority of the days for nearly 11 months beginning in or about November 2010, and continuing through on or about Oct. 20, 2011, Brooks, then employed as director in the commodities business of the bank affiliate, knowingly entered false inflated prices into an internal trade booking and valuation computer software system to effectuate his scheme to conceal trading losses.
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