On January 23, 2013, Wasendorf was sentenced to 50 years in prison and ordered to pay more than $215 million in restitution. See United States v. Russell Wasendorf, Sr., No. 12-CR-2021-LRR (N.D. Iowa Jan. 23, 2013).15See “CFTC Permanently Bars Accountant, Jeannie Veraja-Snelling, for Failing to Properly Audit Peregrine Financial Group, Inc.,” CFTC Release No. PR6675-13 (Aug. 26, 2013); “CFTC Files Complaint against U.S. Bank, N.A. Alleging Unlawful Use of Peregrine Financial Group, Inc.’s Customer Segregated Funds and Violation of Customer Segregation Laws,” CFTC Release No. PR6601-13 (June 5, 2013) [hereinafter “U.S. Bank Release”].16 U.S. Bank Release.17See 2013 Annual Results Release.18See Dodd-Frank.19 Prohibition on the Employment, or Attempted Employment, of Manipulative and Deceptive Devices and Prohibition on Price Manipulation, 76 Fed. Reg. 41,398, 41,398 (July 14, 2011); see Dodd-Frank (amending Commodity Exchange Act § 6(c) (codified at 7 U.S.C. § 9)).20See Consent Order for Permanent Injunction, Civil Monetary Penalty, and Other Equitable Relief, CFTC v. Arista LLC, 12-CIV-9043 (S.D.N.Y. Dec. 3, 2013); “Federal Court Orders Defendants Arista LLC, Abdul Sultan Walji, and Reniero Francisco, All of Southern California, to Pay over $22 Million in Restitution and Fines for Commodity Pool Fraud and Making False Statements to the CFTC,” CFTC Release No. PR6786-13 (Dec. 13, 2013).21See Default Judgment, CFTC v. Peregrine Fin. Grp., Inc., No. 1:12-CV-05383 (N.D. Ill. entered Feb. 13, 2013).

In a third case, a trader resolved an enforcement action filed against him because he misled multiple futures commission merchants regarding the true owner of corporate entity accounts.In enforcement actions against Rafael Novales and Coby Tresner, the CFTC charged the individuals with providing a false or misleading statement to the Commission in connection with a material fact, or omitting to provide in a statement material information to not make the statement misleading. (Click here to access Commodity Exchange Act § 6(c)(2), 7 U.S.C. § 9(2).)The CFTC claimed that, in connection with its investigation of an introducing broker that employed him, Mr. Novales at first said during an interview that he always had customer express authorizations when he placed orders, but later, under oath, said sometimes he placed orders for customers only after leaving voice messages on their telephone answering devices. The CFTC solely charged Mr. Novales with making a false statement and agreed to accept a fine of US $50,000 from him to resolve its charges.

More recently, the CFTC has focused upon pursuing persons engaged in “disruptive practices,” which include (1) violating bids or offers; (2) intentional or reckless disregard for the orderly execution of transactions during the closing period; and (3) “spoofing” (bidding or offering with the intent to cancel the bid or offer before execution), 7 U.S.C. § 6c(a)(5), sometimes in conjunction with allegations of manipulation.[14] 7 U.S.C. §§ 9(10)(C)(ii), 9(10)(D), 13(a)(2).[15]See 7 U.S.C. §§ 1a(38), 6c(a)(5), 9(1), 9(3).

Legal WeedsandMy View: In its complaint against defendants, the CFTC solely relied on the traditional provisions in relevant law prohibiting manipulation and attempted manipulation. (Clickhereto access 7 U.S.C.§9(3) (prior to D0dd-Frank, effectively 7 U.S.C.§9) andherefor 7 U.S.C.§13(a)(2)– the CFTC’s traditional anti-manipulation authorities.) In order toprovemanipulation, said the court, the CFTC had to show that (1) the defendants had the ability to influence market price, (2) an artificial price existed, (3) defendants caused the non-bona fideprice, and (4) defendants intended to cause the non-legitimate price.

In its complaint against defendants, the CFTC solely relied on the traditional provisions in relevant law prohibiting manipulation and attempted manipulation because the challenged conduct occurred prior to the effective date of a new provision of law prohibiting fraud-based manipulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Clickhereto access 7 U.S.C. § 9(3) (prior to D0dd-Frank, effectively 7 U.S.C.§9) and here for 7. U.S.C. §13(a)(2)– the CFTC’s traditional anti-manipulation authorities.Clickhereto access 7 U.S.C.§ 9(1) – the CFTC’s new Dodd-Frank authority.)

While the CFTC announced its position that cryptocurrencies are commodities in 2015, this case marks the first time that a court has weighed in on whether cryptocurrencies are commodities. Having answered that question in the affirmative, the court went on to hold that the CFTC has jurisdictional authority over defendants’ alleged cryptocurrency fraud under 7 U.S.C. § 9(1), which permits the CFTC to regulate fraud and manipulation in underlying commodity spot markets. Regulatory Landscape In recent months, regulators have increasingly turned their attention to cryptocurrency.

o engage with competent legal counsel to ensure that they are operating within the confines of the applicable commodities and securities laws, regulations and best practices. Press Release, Dep’t of Justice, No. 23-131 (Feb. 2, 2023), https://www.justice.gov/opa/pr/man-charged-110-million-cryptocurrency-scheme.Id. Press Release, U.S. Atty’s Office S.D.N.Y., No. 23-036 (Feb. 2, 2023), https://www.justice.gov/usao-sdny/pr/alleged-perpetrator-100-million-crypto-market-manipulation-scheme-make-initial (“SDNY Press Release”).Id.Id. See U.S. v. Eisenberg, 23-cr-00010-RMB, 6:15-7:16 (S.D.N.Y. Jan. 9, 2023), ECF No. 4. SDNY Press Release.Id.Id. Press Release, CFTC, No. 8647-23 (Jan. 9, 2023), https://www.cftc.gov/PressRoom/PressReleases/8647-23 (“CFTC Press Release”).CFTC v. Eisenberg, 23-cv-00173, 12:43 (S.D.N.Y. Jan. 9, 2023), ECF No. 1 (“CFTC Compl.”).Id. at 13:44.Id. at 14:46.U.S. v. Eisenberg, supra note 6, at 2:4. Id. at 2:4-5. SDNY Press Release. CFTC Press Release; CFTC Compl. at 1:1. 7 U.S.C. § 9(1). 17 C.F.R. § 180.1(a)(1)-(3); CFTC Compl. at 15-16. 7 U.S.C. § 9(3). 7 U.S.C. § 13(a)(2). 17 C.F.R. § 180.2.Id. at 15:51.Id. at 15:52, 16:53. CFTC Press Release. 15 U.S.C. § 78j; 17 C.F.R. § 240.10b-5(a)-(c); 15 U.S.C. § 78i(a)(2). SEC Compl. at 11:66; SEC v. W.J. Howey Co., 328 U.S. 293 (1946). SEC Compl. at 8:43-44. SEC Compl. at 9:49-50.Id. at 9:54.Id. 10:58. Press Release, SEC, No. 2023-13 (Jan. 20, 2023), https://www.sec.gov/news/press-release/2023-13. CFTC Compl. at 7:23.[View source.]

And Section 6(c)(1) of the CEA prohibits the use of any “manipulative or deceptive device or contrivance” in connection with the sale of any swap as well as direct or indirect swap or commodity price manipulation and attempted manipulation. 7 U.S.C. § 9(1). The standards are virtually identical for the SEC under Sections 9 and 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.

[T]here is a serious problem with the $10 million fine. … The maximum penalty [at the time under 7 U.S.C. § 9(3) was] $100,000 per violation. The complaint filed by the Division of Enforcement listed only six violations.

In this action, the CFTC chose not to prosecute the signatoryof the CCO annual report, but instead solely held Commerzbank liable for making “false statement[s] or misleading statement[s] of a material fact to the Commission, including … information relating to a swap.” (Clickhereto access Commodity Exchange Act 6(c)(2), 7 U.S.C. §9(2).) This exercise of discretion by the Division of Enforcement to not bring an enforcement action against any individual was judicious.