U.S. regulators have secured a US$1 million fine against the former CEO of a commodities trading operation for deceiving Bank of Montreal (TSX:BMO) with rigged quotes.
The U.S. Commodity Futures Trading Commission (CFTC) announced Thursday that it has obtained a federal court order requiring Kevin Cassidy, the former CEO of Optionable Inc., to pay a US$1 million civil monetary penalty for violating the anti-fraud provisions of the Commodity Exchange Act and CFTC regulations.
The sanction stems from allegations brought by the CFTC back in 2008, when it charged a former BMO trader, David Lee, for mis-marking and mis-valuing BMO’s natural gas options book. At the same time, it also charged Lee and Cassidy, among others, for deceiving BMO, from 2003 through April 2007, by fabricating purportedly independent quotes that BMO used to verify the values reported in its options book.
In May 2007, BMO was forced to restate its latest quarterly earnings after discovering the valuation issues in its commodities trading portfolio, resulting in pre-tax trading losses of $680 million.
Lee settled the CFTC action against him in November 2009, and pled guilty to four criminal counts. He has not yet been sentenced.
In August 2011, Cassidy also pled guilty to one criminal count of conspiracy; and, in April 2012, he was sentenced to 30 months imprisonment followed by three years of supervised release. The fine against Cassidy was entered by Judge George Daniels of the U.S. District Court for the Southern District of New York, who found that he had violated derivatives laws and rules, and imposed permanent trading and registration bans against him.