CFTC Orders Trader to Pay $160,000 for Making Misrepresentations to Futures Commission Merchants

CFTCWashington, DCThe U.S. Commodity Futures Trading Commission announced today that it issued an order filing and simultaneously settling charges against Aron Seidenfeld, a New York-based futures trader, for causing material misrepresentations to be made in account opening documents submitted to multiple futures commission merchants (FCMs). The order was entered on Monday, September 30, 2019.

“This matter should serve as a clear message to market participants that the CFTC will not tolerate conduct that inhibits the ability of an FCM or other regulated entity to appropriately assess the risk of allowing a person or entity access to CFTC-regulated markets,” said CFTC Enforcement Director James McDonald.

Specifically, the order finds that Seidenfeld was the trustee of the Seidenfeld Irrevocable Trust, which owned three corporate entities that opened successive trading accounts at multiple FCMs.  After the first corporate entity closed its trading account with an approximately $2.1 million unsecured debit, a series of FCM accounts were opened in the name of the second and third corporate entities.  In each account application, Seidenfeld concealed the identity of the trust as owner of the corporate entities and misrepresented the controlling persons of the corporate entities.  In addition, documentation submitted to support the FCM applications contained false information, was inconsistent with other existing versions of the entities’ documentation, and was apparently generated solely to support the FCM applications.  The purpose of these actions was to keep the Seidenfeld name and/or the identity of the trust off the FCM paperwork while the $2.1 million debit from the first FCM account remained outstanding.  The subsequent accounts also sustained losses that went unpaid.

FCMs rely on the information provided in account applications to manage risk and fulfil their regulatory obligations to, among other things, establish risk-based limits in customer accounts based on the particulars of each customer.  Misrepresentations by a customer can prevent an FCM from managing the risk associated with that customer and put the FCM at greater risk of insolvency.  Insolvency of an FCM could disrupt markets and the clearing system and harm customers, which goes to the heart of the concerns the Commodity Exchange Act (CEA) and CFTC regulations are meant to address.

The order requires Seidenfeld to pay a $160,000 civil monetary penalty and to cease and desist from further violations of the CEA and CFTC regulations, as charged.  The order further imposes on Seidenfeld a 90-day ban on trading in CFTC-regulated markets and registering with the CFTC in any capacity.

The CFTC Division of Enforcement staff members responsible for this case are Ilana D. Waxman, Daniel C. Jordan, Michael Loconte, and Rick Glaser.