CFTC Orders an Iowa Introducing Broker and Its Principals to Pay $11.9 Million in Restitution to Farmers and a $1.25 Million Civil Monetary Penalty for Fraud, Unauthorized Trading, and False Statements to the CME, Among Other Violations
On September 26, 2018, the Commodity Futures Trading Commission (“CFTC”) announced that it issued an Order filing and simultaneously settling charges against Kooima & Kaemingk Commodities, Inc. (“K&K”), Lauren Kaemingk (“Kaemingk”), and Bradley Kooima (“Kooima”), all of Iowa, for Kaemingk’s fraud, unauthorized trading, and making false or misleading statements to CME Group Inc. (“CME”), for a former employee’s fraud, unauthorized trading, and violation of CME position limits in live cattle futures contracts, and for K&K’s, Kaemingk’s, and Kooima’s supervision failures.
The CFTC Order requires K&K, Kaemingk, and Kooima to pay $11,920,857.05 in restitution to their customers, which are almost entirely comprised of individual farmers and large-scale farming operations. The Order also requires K&K, Kaemingk, and Kooima to pay a civil monetary penalty of $1,250,000 and orders that they cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged.
CFTC Director of Enforcement Comments
James McDonald, CFTC Director of Enforcement, stated: “Many farmers depend on the futures markets to help protect their operations from financial uncertainty. Those farmers should be able to trust that their Introducing Broker will deal with them honestly. Brokers are also expected to respond truthfully and completely to CME and other exchanges when misconduct is being investigated. When brokers defraud their customers and then seek to cover it up — as in this case — the Commission will vigorously pursue them.”
As noted in the Order, K&K fraudulently solicited customers and opened investment accounts for certain customers beginning around January 2012. Further, the Order finds that, between January 2012 and February 2016, K&K, through two of its associated persons, a former employee and Kaemingk, defrauded customers by its unauthorized trading, which caused net customer losses of approximately $11.9 million.
Further, the Order finds that when the CME opened an investigation into the former employee’s position-limit violation, K&K, through Kaemingk, engaged in a cover-up to conceal the scope of the unauthorized trading at K&K. Kaemingk encouraged a customer to withhold information from CME during its investigation. Kaemingk also made misleading statements to CME during an interview.
CME issued a Notice of Disciplinary Action in which K&K, Kaemingk, and Kooima agreed to pay a fine of $1.25 million arising out of the conduct that is the subject of the CFTC’s Order. In imposing its civil monetary penalty, the CFTC took into account the fine imposed by CME in its related action.