CFTC Sues Chinese Citizen Accused of Executing Fraudulent Money Pass Trades
The Commodity Futures Trading Commission recently sued Chinese citizen Yumin Li, for violations of the Commodity Exchange Act (CEA). The CFTC accused Ms. Li of fraudulently accessing her employer’s futures account to transfer approximately $300,000 to Kering Capital, Ltd., a company owned by her mother, with a futures trading account operated by Ms. Li. According to the CFTC complaint, Ms. Li was employed by a trading firm in California to conduct research related to futures markets and she was afforded a unique ID to conduct that research, also allowing her to trade on the Chicago Mercantile Exchange (CME). The CFTC alleges that Ms. Li used the account to trade uncommon, illiquid Eurodollar futures contracts with Ms. Li’s Kering Capital account when no other orders were likely to interfere with the trade. Ms. Li allegedly used her employer’s account to buy the contracts at a high price from Kering Capital and then sold them back at a lower price. Using this process, during six separate trading days, Ms. Li was able to siphon approximately $300,000 from her employer’s account. According to the CFTC, Ms. Li violated Section 4b of the CEA by defrauding her employer and entering unauthorized trades in its account, misappropriating those funds. The CFTC also alleges that this activity separately violates Section 4c(a) of the CEA as well as CFTC regulation 1.38(a) because Ms. Li knowingly executed fictitious, non-competitive trades––commonly known as money passes––in which she used the CME to transfer money between accounts rather than execute true, competitive trades. The CFTC is seeking disgorgement of the misappropriated funds from Kering Capital as well as civil penalties and fees under the CEA.
Complaint, CFTC v. Li, No. 15-cv-05839 (E.D. Ill. July 1, 2015).