May 2022 | Volume 42 | Issue 5 Futures and Derivatives Law Report lustrated by recent enforcement actions , demonstrate the agency ’ s continued focus on cryptocurrency and swaps markets . Over the past year and a half , the Enforcement Division also continued to hit hard on regulatory violations and targeted a number of areas that have traditionally formed the basis for CFTC enforcement actions , including market manipulation , spoofing , and retail fraud .
A . TRADITIONAL ACTIONS : MANIPULATION , SPOOFING , AND RETAIL FRAUD
1 . MARKET MANIPULATION AND SPOOFING
In FY 2021 , the CFTC brought eight enforcement actions involving market manipulation , which generally aligns with historical levels . The Division charged this behavior under both its traditional price manipulation statute Section 9 ( a )( 2 ) 43 as well as its Dodd-Frank-expanded manipulation authority under Section 6 ( c )( 1 ) and ( 3 ), 44 and related Regulations 180.1 ( a )( 1 ) 45 and ( 3 ), 46 and 180.2 . 47 The CFTC also concurrently charged manipulation and disruptive trade practices under Section 4c ( a )( 1 ) and ( 2 ). 48
Cases involving manipulation are less frequently filed than other violations for several reasons . For instance , building a manipulation case may require months or years of informationgathering , whereas proving regulatory violations is less resource-intensive . While manipulation cases are less common than other types of enforcement actions , they are often quite significant and involve the highest penalties possible for the Division . With respect to one traditional manipulation case in which the CFTC charged a former fuel oil trader with manipulating a fuel oil benchmark , Acting Director of Enforcement , Vince McGonagle , sought to publicize the case as an example of the Commission ’ s toughness on market manipulation both in general and in energy markets in particular . 49 He stated , “[ t ] his enforcement action demonstrates that manipulation of energy prices will not be tolerated , and the CFTC will aggressively protect market participants who rely on the integrity of commodity benchmarks .” 50
In addition to the above types of manipulation cases , CFTC Enforcement also interprets Section 6 ( c )( 1 ) and Regulation 180.1 to include prohibitions against certain forms of insider trading . 51 In FY 2021 , the CFTC utilized Regulation 180.1 in an insider trading context for the first time to charge a former energy broker and its owner with misappropriation of nonpublic information on a tipper-tippee theory , in addition to fraud and supervision violations . 52 This charge is part of a sweeping , ongoing investigation by the CFTC and U . S . Department of Justice (“ DOJ ”) into an alleged conspiracy involving traders and brokers of natural gas futures contracts . 53 The Commission swiftly followed by filing a related complaint in federal court against a second individual , identified as the energy trader who was “ the last link in [ the ] tipping chain ” and who , through his business , “ trade [ d ] on the basis of . . . material , nonpublic information , and [ entered ] into fictitious trades at non-bona fide prices .” 54 In February 2022 , the CFTC charged a third individual , identified as the energy trader who “ entered into fictitious , non-arm ’ s length trade . . . on the basis of . . . material , nonpublic information as disclosed ” by the two previously-charged individuals . 55 All three cases also involve ongoing parallel criminal investigations by the DOJ . 56 , 57
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