In an Unusual Agreement, Kraft and Mondelez Consents to $16 Million Penalty for Futures Manipulation with the CFTC
The CFTC action against Kraft and Mondelez for manipulation of the wheat futures markets is over. Yesterday, Kraft and Mondelez agreed to a $16 million civil monetary penalty and an injunction against future manipulative actions. Interestingly, the CFTC cannot comment on the action because it agreed to the following provision in the consent order:
“Neither party shall make any public statement about this case other than to refer to the terms of this settlement agreement or public documents filed in this case, except any party may take any lawful position in any legal proceedings, testimony or by court order.”
Therefore, the CFTC has no ability to comment on the consent, nor did the consent contain any factual findings or conclusions of law. Having factual findings and conclusions is the only way to provide invaluable guidance to market actors in the CFTC’s interpretation of its laws. Especially in this case where the new manipulation standard was being tested. As background, under rules passed out of Dodd-Frank, the CFTC no longer must show that traders specifically intended to manipulate the markets, and that they had created an artificial price in doing so, only that traders acted recklessly.
Former CFTC Senior Trial Attorney and Kennyhertz Perry Partner Braden Perry spoke with Law360 in 2015 about the case. Here’s what he said: “When you change standards of proof in certain activities, there are always questions that come with that,” said Braden Perry. “At some level, there needs to be judicial interpretations of the new provisions of Dodd-Frank. It’s a matter of time and testing before the true legal standard comes out.”
The consent entered yesterday fails that basic need of a determination (at least from the CFTC) of those provisions in relation to the facts of this case.
You can read the consent, the statement by the CFTC, and the statement by Commissioners Berkowitz and Behnam here.
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