September 29, 2014

CFTC Orders Fan Zhang to Pay $250,000 for Engaging in Fictitious Sales and Noncompetitive, Prearranged Trades on CME and CBOT

Zhang’s Prearranged Trades Realized Profits over $200,000

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Fan Zhang for engaging in fictitious sales and noncompetitive, prearranged trades in the Las Vegas Housing Market Futures Contract and the Cash-Settled Cheese Futures Contract, both traded on the CME, a designated contract market owned by the CME Group, and the Ethanol Futures Contract traded on the Chicago Board of Trade (CBOT), which is a designated contract market also owned by the CME Group. Zhang is a resident of Las Vegas, Nevada, and Cambridge, Massachusetts, and is not registered with the CFTC in any capacity.

The CFTC’s Order requires Zhang to pay a $250,000 civil monetary penalty as a result of his unlawful conduct. The Order also requires Zhang to comply with certain undertakings, including a prohibition against trading commodity futures and options for a five-year period. Finally, the Order requires Zhang to cease and desist from further violations of Section 4c(a)(1) of the Commodity Exchange Act (CEA) and CFTC Regulation 1.38(a), as charged.

The Order finds, and Zhang admits, that on December 26, 2012, and on several occasions in March 2013, Zhang transferred trading profits between two separate accounts by intentionally placing buy and sell orders for the same price, volume, and expiration month in CME’s Las Vegas Housing Market and Cash-Settled Cheese futures contracts and CBOT’s Ethanol futures contract. One of the accounts is held in the name of FZIC, LLC, which is an investment club that is 50 percent owned by Zhang, and the other account is held in the name of Zhang’s mother, according to the Order. Zhang intentionally engaged in prearranged trades for the purpose of discretely transferring money into his mother’s trading account without her knowledge, and, during the relevant period, Zhang’s mother’s account realized profits over $200,000 from his prearranged trades, the Order finds.

Zhang’s noncompetitive, prearranged trades negated market risk and price competition and constituted fictitious sales, in violation of the CEA. Further, by entering into fictitious sales and prearranged trades, Zhang also engaged in noncompetitive transactions in violation of a CFTC Regulation, according to the Order.

The CFTC thanks the CME Group for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Saadeh Al-Jurf, John Einstman, and Paul G. Hayeck.

Media Contact
Dennis Holden
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Last Updated: September 29, 2014