(CN) – A federal judge ordered a former Chicago Board of Trade trader and broker to pay $6.6 million for defrauding customers who placed orders in 5-year Treasury futures.
David Sklena, of Skokie, Ill., was ordered to disgorge $1.65 million and was fined $4.96 million, by U.S. District Judge Virginia Kendall in Chicago.
The Commodity Futures Trading Commission in January 2008 accused Sklena and Edward C. Sarvey, of Lemont, Ill., of fraud and noncompetitive trading.
Sklena did not respond to the CFTC’s request for summary judgment, which Judge Kendall granted.
Kendall found that Sarvey sold 2,274 5-year Treasury note futures contracts on behalf of his customers to Sklena in 2004 at an price that was much lower than the market price at the time of the trade, and that the trade was not executed openly and competitively as required by CFTC and CBOT rules.
Sklena immediately sold back 485 of the contracts in another noncompetitive trade, and sold the remaining 1,789 futures contracts on the CBOT’s electronic trading platform at the prevailing, higher market price, according to the judge’s Opinion and Order.
Sklena entered the day with less than $25,000 in his trading account and reaped a profit of approximately $1.65 million at the expense of Sarvey’s customers, the CFTC said.
Kendall found that the two traders’ noncompetitive trading brought them profits, but that Sarvey’s customers were “disadvantaged to the tune of $2,048,781.”