Emloyment Law Group - Law Firms - Whistleblower Lawyers
Live Chat Contact Us 24/7 Email US
Contact Us: Live Chat, Call, Email Chat email

Use of this form does not establish an attorney-client relationship. As a next
step, you will hear from a client specialist.

Our Clients in Their
Own Words
Play Video: Whistleblower Attorney Testimonials | Wendell Carter
Previous Video
Next Video

Toll Free: 1-888-826-5260
Fax: 202-261-2835

[email protected]

1717 K St. NW
Ste 1110
Washington, DC 20006-5345

The Employment Law Group,PC. BBB Business Review

Whistleblower Law Blog

Federal Court in New York Orders Chicago Resident and Former Floor Broker, Kent R.E. Whitney, to Pay $600,000 for Margin Call Avoidance Scheme

On May 22, 2012 the U.S. Commodity Futures Trading Commission (CFTC) announced that Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York issued a consent order and permanent trading and registration ban on former Chicago, Illinois floor broker Kent R.E. Whitney.  As part of an elaborate scheme to trade stock options without posting the required margin, Whitney was accused of making false and misleading statements to Chicago Mercantile Exchange (CME) representatives, futures commission merchants (FCMs), and others.

The consent order found that between May 2008 and April 2010, Whitney fraudulently avoided substantial margin calls when placing orders for commodity options traded on the New York Mercantile Exchange (NYMEX) and the CME by utilizing a margin avoidance scheme with out-of-the-money options that had no intrinsic value.  He did this by waiting until the day or two before the front month options expired to sell a large volume of front month out-of-the-money options on the NYMEX and CME trading floors.  In order to show that the accounts he sold were open and held sufficient funds, Whitney would provide clearing firms with invalid account numbers for the trading allocations he submitted, however, the accounts he traded were closed and held no funds for margin.

When the clearing firms that received the initial allocations realized that the account numbers Whitney provided were invalid or the accounts were closed, they would return the trades to the clearing firms of the executing floor brokers.  Whitney would then provide valid account numbers in order to clear the trade, which ultimately helped him avoid posting margins by shifting the overnight margin risk to the clearing firms of the executing floor broker.  This practice allowed Whitney to avoid posting over $96 million in margin calls and made it possible for Whitney to collect the premiums for the accounts he traded.

The Employment Law Group® law firm is a leader in the field of whistleblower law and has an extensive nationwide whistleblower practice representing employees who have exposed illegal activity by their employer, including securities fraud and commodities trading fraud.

Tagged: , ,

decorative line
facebook logo twitter logo linkedin logo
Home  |  What We Do  |  Our Team  |  Our Clients  |  In The News  |  Resources  |  Contact Us

Our Location: Washington, D.C.

© 2021 The Employment Law Group, P.C. - All rights reserved.
Disclaimer | Terms of Use | Privacy Policy