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From Securities Regulation Daily, August 11, 2017

Contrite ex-trader defeats CFTC’s lifetime ban and ‘excessive’ penalties

By Brad Rosen, J.D.

A judge sitting in the U.S. District Court for the Southern District of New York rejected the CFTC’s bid to impose lifetime registration and trading bans against Fan Wang, an ex-trader who, in a related criminal action, had pleaded guilty to one count of making a false report in connection with a commodities transaction and had previously served a three-month prison sentence. The court also reduced the Commission’s request for a civil monetary penalty from $335,466 by 50 percent to $167,728 (CFTC v. Wang, August 9, 2017, Koeltl, J.).

Underlying claims of wrongdoing. According to the CFTC’s complaint, in November 2011, Wang, then a clerk and assistant trader at a financial services firm engaging in proprietary trading, knowingly made multiple manual false entries in that firm’s computerized trading records relating to his purchases of certain light sweet crude oil futures contracts for a firm proprietary trading account that same day. The Commission also claimed Wang knew at the time he made the entries in the firm’s trading records that the entries were false and that making the false entries was illegal.

\When confronted by the firm’s managing partner asking him to explain why the firm had received a margin call two days after making the false record entries, Wang explained what he had done. Wang was terminated from the firm that same day.

Criminal proceeding. Wang did not learn that he had been under investigation until March 2014. The Commission did not identify any additional wrongdoing of any kind by Wang during this interim time period. The defendant faced criminal charges in July 2014 and was subsequently sentenced in November 2014 to a three-month prison term and three years of supervised release. He was also ordered to pay $2.2 million in restitution to his former employer.

In a statement before the court at the sentencing, Wang acknowledged his wrongdoing, accepted responsibility for his actions, and apologized to the court, the government, his former employer, and his parents. He stated further, "I want the Court to know that I have learned my lesson. I have otherwise been a law-abiding citizen my whole life and I promise that I will never, ever, do anything like this again."

CFTC proceeding and the court’s rejection of remedies sought. In September 2016, the CFTC brought an enforcement action against Wang. In April 2017, Wang and the CFTC entered into a consent order resolving all liability claims and entered a permanent injunction prohibiting Wang from violating CEA as charged. Matters relating to appropriate equitable relief, such as a registration ban, a trading ban, and a monetary penalty, were reserved at that time.

The court noted that Wang, a Chinese immigrant, arrived in the U.S. as a teenager and did not speak English. He later attended Cornell University and worked his way up from clerk to trader until the time of his termination. Wang now works as a math and physics tutor, for which he earns approximately $3,700 per month. He lives with his mother and has no virtually no assets. He has been making timely restitution payments to his former employer.

In its current order, the court firmly rejected the CFTC’s efforts to impose a registration and trading ban against Wang, concluding, "a permanent injunction, other than the consented to injunction against violation of the CEA, is not warranted." The court continued, "[t]o justify an injunction, the Commission relies almost exclusively on the underlying wrongdoing itself. But that conduct does not show that the defendant is likely to commit further violations of the CEA in the future." The court also noted that the defendant’s dream is to return to trading commodities, and observed, "[i]f he is able to accomplish that goal, there is no evidence that he will violate the CEA again.

Lastly, the court rejected the CFTC’s argument for imposing the maximum statutory penalty of $335,446 against Wang for two violations of the CEA. Instead, the court reduced the request by half to $167,728, finding that amount was rationally related to the defendant’s misconduct and that the penalty sought by the Commission "would be excessive and unrealistic."

This case is No. 16-cv-6961(JGK).

Attorneys: Peter Martin Haas for CFTC. Leif Thorsten Simonson (Kobre & Kim LLP) for Fan Wang a/k/a Alex Wang.

MainStory: TopStory CFTCNews CommodityFutures Enforcement FraudManipulation NewYorkNews

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