The U.S. District Court for the Eastern District of Washington approved a Consent Order in a CFTC action against a cattle supplier who allegedly made false representations to the Chicago Mercantile Exchange "concerning its cattle inventory, purchases, and sales" and violated exchange-set position limits.
The Consent Order concluded that the supplier engaged in a years-long endeavor to fraudulently file invoices and reimbursement requests for cattle on behalf of a beef producer, without raising or buying the cattle as represented. The CFTC's original allegations were made in a Complaint on March 31, 2021, against the cattle supplier and its former president. The CFTC's Complaint included allegations that the supplier made false allegations to the Chicago Mercantile Exchange and violated exchange-set position limits in furtherance of its fraud.
The Order requires that the cattle supplier "pay a combined $263 million in restitution and civil monetary penalty in connection with a phantom cattle fraud scheme."
In dissent, CFTC Commissioner Dawn Stump disagreed with the CFTC's decision to pursue a fraud charge in addition to the position limit and false statement charges. Ms. Stump criticized the CFTC for "inject[ing] itself into this cash market, single-victim, business fraud" and expressed concern that market participants would view the agency's action as government overreach. She noted that, due to the supplier's impending closure and bankruptcy protection, the supplier was not likely to actually pay the amounts due under the Consent Order.
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