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CFTC Files Enforcement Action Against Chinese National

World Affairs

Open Eyes Opinion {source: CFTC}

July 6, 2015

CFTC Files Enforcement Action against Chinese National Yumin Li and BVI Company Kering Capital Ltd. for Defrauding a CME Member in an Illegal Trading Scheme

Li and Kering Capital Charged with Defrauding Li’s Employer and Misappropriation through a Scheme Involving Fictitious and Non-Competitive Trading

Court Enters Restraining Order Freezing Defendants’ Accounts and Protecting Books and Records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil enforcement action charging Defendants Yumin Li, a citizen of the People’s Republic of China, and Kering Capital Ltd., a British Virgin Islands (BVI) company owned by Li’s mother, with fraud, engaging in fictitious transactions, and trading noncompetitively, in violation of the Commodity Exchange Act and CFTC regulations. Neither Li nor Kering Capital has ever been registered with the CFTC.

On July 2, 2015, the Honorable Sara L. Ellis, U.S. District Court for the Northern District of Illinois, issued a restraining Order freezing Defendants’ trading accounts and prohibiting them from destroying documents and denying CFTC staff access to books and records.

The CFTC Complaint, filed on July 1, 2015, alleges that Li was an employee of an individual with trading privileges on the Chicago Mercantile Exchange (CME). According to the Complaint, on six separate occasions over the course of seven weeks between March 17, 2015 and May 6, 2015, Li and Kering Capital engaged in a series of unlawful money passes involving the Eurodollar contract traded on the CME’s electronic Globex platform.

Li misappropriated approximately $300,000 from her employer by trading the employer’s account noncompetitively against an account belonging to Kering Capital that Li controlled, the Complaint charges.

Further, according to the Complaint, in each of the money passes Li placed an order for the Kering Capital account to buy or sell a Eurodollar “butterfly spread” at a certain quantity and at a certain price.

She then placed a second order for her employer’s account on the opposite side of the market in the same product for the same quantity and the same price.

After the orders were matched, Li entered into offsetting transactions to close out the position. As alleged, in each instance, Li structured the transactions such that her employer’s account would always buy at higher prices and sell at lower prices opposite the account Li controlled at Kering Capital, with the result that the Kering Capital account profited and her employer’s account incurred a loss.

Li concentrated her trading in illiquid Eurodollar contracts with expiration dates that were five or more years beyond the trade date, according to the Complaint. She also traded outside of regular CME trading hours so that there would be fewer market participants trading, and she would have a better chance of matching her orders, according to the Complaint.

According to the complaint, Kering Capital is a trading company formed in the BVI in November 2014 by Li’s mother, who is its Chief Executive Officer and sole shareholder.

In its continuing litigation, the CFTC seeks restitution, civil monetary penalties, trading and registration bans, and a permanent injunction against further violations of the federal commodities laws.

The CFTC thanks the CME Group, Inc. for its assistance in this matter.

The CFTC staff members responsible for this action are Lindsey Evans, Melissa Cavers, David Terrell, Venice Bickham, Scott Williamson, and Rosemary Hollinger.

 

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