The Memphis-based McVean Trading & Investments, its top leaders and a consultant to the firm have been fined a total of $5 million for deceptive trading.
The Commodity Futures Trading Commission last week announced an order both filing and settling the charges against chairman and chief executive Charles McVean, president Michael J. Wharton and longtime company consultant Samuel Gilmore.
The order states that McVean and Wharton intentionally or recklessly injected false information into the market, potentially affecting the live cattle futures market.
The company secretly used cattle feed yards as straw purchasers for hundreds of cattle futures contracts.
The order requires McVean to pay a civil penalty of $2 million, McVean Trading & Investments, $1.5 million, Wharton, $1 million, and Gilmore, $500,0000.
Efforts to reach McVean for a comment were unsuccessful Friday afternoon.
McVean has been a civic leader in Memphis, most recently leading the successful effort to build a pedestrian and cycling path across the Mississippi River. The route along the Harahan Bridge is called Big River Crossing.
“By using these straw purchasers, McVean and Wharton were able to control substantial portions of the market without disclosing that control, which caused other market participants, including live cattle traders with open short positions, to see wider market interest, participation and fragmentation on the long side of the market than actually existed,” the commission states in a release.
“For markets to have integrity, market participants must be able to trust that the markets operate free of manipulative or deceptive conduct,” James McDonald, the commission’s enforcement director, said in a prepared statement. “The commission will always act to address those threats to the markets it regulates.
“That includes cases like this one, where market participants try to game the markets by injecting false information, which distorts the view of that market seen by other participants.”
The commission describes Gilmore as “an aider and abettor” of the violations.
“The order specifically finds that McVean in December 2012, and McVean and Wharton in February 2013, accumulated long live cattle futures positions in (McVean Trading & Investments) customer and house accounts they controlled that were at or near the spot month position limits imposed by the Chicago Mercantile Exchange, Inc. (CME),” the commission release states.
“McVean and Wharton secretly increased these positions beyond spot month position limits by directing and paying four cattle feedyards to buy and hold hundreds of additional live cattle futures contracts in the feedyards’ accounts pursuant to “swap agreements” that, in reality, served only as the mechanism by which (the company) paid the feedyards $100 per contract and margin costs for putting on long futures positions controlled by McVean and Wharton,” the order states.