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Update – 7 Charged Nymex Illegal Trading = tip iceberg

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#6939

Charles Randall
Participant

<Here is recent Bloomberg news example of illegal trading that is just tip iceberg – these were obvious & clumsy versions (unfortunately they were on Energy side) of what original article was pointing too – CER>
 
Seven Charged in NYMEX Illegal Trading Probe, Prosecutors Say
2008-04-08 12:50 (New York)
By Karen Freifeld
     April 8, 2008 (Bloomberg) — Seven men were charged in a joint
probe by New York prosecutors and the Commodity Futures Trading
Commission into an alleged front-running scam involving evidence
tampering and bribery at the New York Mercantile Exchange
.
     Steven Karvellas, a former NYMEX director, pleaded guilty
today to securities fraud as part of the scheme to profit from
trades of customer natural gas contracts. Six other men — five
former floor clerks and another NYMEX employee — were previously
charged in the case,
Manhattan District Attorney Robert
Morgenthau said today in a statement.
     Karvellas used the purchase and sale of the contracts
between September 2002 and May 2003 to trade for himself,
according to a March 26 plea agreement. He agreed at a hearing
today in New York State Supreme Court in Manhattan to serve five
months in prison, five years probation and pay $850,000.
     Karvellas would decide to trade for himself “by delaying
the allocation of customer orders to see what direction the
market was moving,
” according to the agreement. “When the
market price made the order profitable, he would then allocate
the contracts to himself.”
     An independent broker who joined the exchange in 1990 and
became a board member in 1996, Karvellas was a director at NYMEX
from 1996 to 2006, according to company filings
.
     Three others have pleaded guilty in the case, Morgenthau
said in a statement. They are Thomas Maloney, a former floor
broker for Maloney Trading; Brian Keane, a former floor clerk for
Power Futures Trading Inc.; and Ryan Tremblay, a former floor
clerk for several companies, Morgenthau said.
     They have all pleaded guilty to trading ahead of customer
orders, according to the statement. Maloney will be sentenced to
probation and a $75,000 fine; Keane is to be sentenced to four
months in jail; and Tremblay is to be sentenced to probation,
prosecutors said.
     Two other former floor clerks were arrested on similar
charges
, Morgenthau said. They include John Kozlik, a clerk for
Maloney Trading, and Al Demicoli, a clerk for New York Energy and
Metals Executions Inc. A former MYMEX employee, Alvin Perez, was
arrested for commercial bribe receiving, according to the
statement. He was charged with accepting cash or gifts from floor
brokers in exchange for sharing information about internal NYMEX
investigations into broker trading practices.

                        Evidence Tampering

     Morgenthau said that, when Karvellas became aware of the
investigation into trading practices and that records had been
subpoenaed by a grand jury, he ordered a subordinate to destroy
trading records that would have exposed his practices.
     Karvellas began his career as a clerk at the Commodity
Exchange in 1984 and was elected to the board of governors in
1987, according to a 2001 proxy filing. He served on the
executive committee from 1998 to 2002, according to a 2005
statement from NYMEX.
     He also served as chairman of the adjudication, compliance
review and natural gas advisory committees, and as vice chairman
of the floor broker advisory committee.
     “He violated his obligation to faithfully execute his
customers’ orders and he stole trading profits that rightfully
belonged to his customers,” according to the plea deal.
     Defense lawyer John Siffert declined to comment. Sentencing
was scheduled for Sept. 9.
     The case is People v. Karvellas, 08-01511, New York State
Supreme Court (Manhattan).

–With reporting by Matthew Leising in New York. Editors: David
Rovella, Otis Bilodeau

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