Open E-Cry and Velocity Affected by Fictious Trades

Discussion in 'Retail Brokers' started by cstfx, Jun 16, 2010.

  1. cstfx


    From CFTC Enforcement Action Bulletin:

    CFTC Charges Marat Yunusov with Engaging in a Series of Unlawful Commodity Futures Transactions on Globex

    Court order freezes certain of Yunusov’s assets and prohibits the destruction of documents.

    Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) filed a complaint on June 11, 2010, in the U.S. District Court for the Northern District of Illinois charging Marat Yunusov with engaging in fictitious transactions and trading noncompetitively on the Chicago Mercantile Exchange (CME) Globex electronic trading platform. Yunusov, who has never been registered with the CFTC, has held himself out to be a Russian national and also uses the name Ayrat Yunusov.

    On June 14, 2010, the emergency judge, the Honorable Joan B. Gottschall, issued a restraining order freezing certain of Yunusov’s assets and prohibiting the destruction of documents. Judge Gottschall set the case for a status hearing on June 16, 2010, before the assigned presiding judge, the Honorable Elaine E. Bucklo. A hearing on the CFTC’s motion for a preliminary injunction will be scheduled at a date to be determined.

    Specifically, the CFTC complaint alleges that, during the evening of June 3 and the morning hours of June 4, 2010, Yunusov engaged in a series of unlawful commodity futures transactions on the CME’s Globex electronic trading platform, buying and selling thousands of futures contracts, the vast majority of which were in back-month, illiquid markets. Using separate accounts carried at two different registered futures commission merchants, Open E Cry LLC and Velocity Futures, LLC, Yunusov’s trading resulted in more than $7.8 million in losses to his Open E Cry account and an approximate $7.2 million profit to his Velocity account, after commissions and fees. Open E Cry has had to cover the losses from its own proprietary funds, according to the complaint.
  2. Ok I'll bite. What's the scam did he hack into OEC and Velocity or what? Why back illiquid months?
  3. Here are the details that the CFTC doesn't bother to mention:

    A Russian man in the United States on a work visa exploited a software glitch to swipe nearly $8 million by trading Russian ruble futures, a commodities firm claims Cook County Court. Plaintiff Open E Cry claims that Marat Yunusov's trades on June 4 - last Friday - accounted for more than 50 percent of all the foreign exchange trades on the Chicago Mercantile Exchange that day.

    Open E Cry, a broker registered on the Merc as OEC, claims that in early June, Yunusov discovered the glitch in the third-party online accounting software it used.

    Because of the software error, losses in Russian ruble futures, a lightly traded commodity, were reflected at 1/10th their actual value, Open E Cry says.

    Upon discovering the software error, Yunusov and an unnamed accomplice made more than 19,000 trades in a single day - June 4 - booking the losses on Yunusov's account, while hiding his gains in his confederate's account, according to the complaint.
  4. So, does velocity futures get to keep the money?
  5. Thanks interesting.
  6. What are they alleging? Fraud or conspiracy?

    If OEC had a bug and failed to manage risk they have a user agreement where they can pursue the individual/entity.

    Taking losses is hardly a crime and these transactions went through an exchange. So his pal profited at velocity...

    I suppose this may set precedence for all sorts of shady deals between banks, sec, regulatory officials, treasury.

    The bailout accounting remains a mystery... how many of those transactions were similar?
  7. 1) This is what you get for allowing things like $300-$500 margins. This is one reason that you should avoid tiny brokers, and prefer things like IB, who has more reasonable margin requirements.

    2) WHY would OEC allow his account to even get near to negative territory?
  8. You would think that no electronic broker would let a customer dig a deep hole in their account by overtrading.

    Especially after the rogue wheat trader cost MF Global $141.5 million over 2 years ago and put futures brokerage firms on notice not to allow rouge traders to exceed proper account limits for trading and losses.

    No matter the software mistake putting the wrong value on the Russian Ruble contract the trading of thousands of contracts in a small account should have raised a big red flag.

  9. +1

    You have to wonder what broker (clerk) was sitting there overnight and just WATCHING the tickets print massive number of deferred-month RUBLE futures. How do you NOT catch that?!

    I agree regarding the $500 day-trading margins, though this was not applicable here.

    You can lose your money at an FCM even if your money is segregated. If one account blows up massively the FCM and its customers eat the loss....

    ...why is why you want a broker that requires FULL INITIAL MARGIN.

    MAYBE day-trading margins of 50%, strictly enforced. I almost opened accounts with a few places that have low margin requirements but prudence got the better of me.
  10. Could you offer some recent examples of innocent-bystander customers losing seg funds when an FCM failed? I recall Volume Investors, but that was 25 years ago, and I believe all customers were made whole. Thanks.
    #10     Jun 16, 2010