A floor broker who traded options at the Chicago Board of Trade agreed to settle CFTC charges that he defrauded his employer by (i) falsely inflating the value and profitability of options positions and (ii) misrepresenting the number of options and risk associated with his position.
According to the Consent Order, the floor broker's activity resulted in his employer, proprietary trading firm Rock Capital Markets, LLC ("Rock Capital"), paying him $285,000 in draws based on false reports of his trading positions and profitability. The floor broker's misconduct resulted in losses of over $13 million and led to the collapse of Rock Capital.
The floor broker agreed to pay almost $14 million in restitution and $855,000 in civil monetary penalties and consented to certain permanent trading and registration bans, among other injunctive relief, to settle the charges. Earlier this year, he pleaded guilty to criminal charges as to the same conduct.
Commentary
The case serves as a reminder that many of the largest frauds at financial institutions have been perpetrated by employees of those institutions. Revisit your internal controls.
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