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Articles Tagged with Commodities Fraud

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The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit in the U.S. District Court for the District of Columbia alleging that online betting market Intrade and associated companies violated the Commodities Exchange Act by facilitating illegal off-exchange trading in options contracts. The complaint is accessible below.

Intrade operates an online “prediction market” trading website through which customers buy or sell what are technically options contracts enabling customers to wager whether certain events will occur. The subject matters of the wagers range from political elections to whether NASA will announce the discovery of extraterrestrial life. Certain of the Intrade contacts, including

Bettors who predict that an event will occur buy shares in Intrade, and those who predict the event will not occur sell shares. If the event occurs, bettors who bought shares receive $10. If the event does not occur, bettors who sold shares must pay $10. The “price” of each share represents the percentage likelihood of an event occurring based on the collective wisdom of all bettors in a particular options contract or wager.

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The torrent of disturbing information arising from the implosion of futures commission merchange MF Global, Inc. continued today when it was revealed that MF Global was “not in compliance” with rules that prohibit brokerage firms from commingling client funds with their own monies. The head of the Chicago Mercantile exchange said Tuesday confirmed that MF Global was not in compliance and stated as follows: “While we are unable to determine the precise scope of the firm’s violation at this time, we are investigating the circumstances of the firm’s failure.”

This new disturbing information has given rise to rampant speculation that MF Global diverted customer funds in order to meet margin calls arising from its own losing proprietary trades in European debt instruments.

This news came only one day after the Securities Investor Protection Corporation (SIPC) initiated the liquidation of MF Global Inc., under the Securities Investor Protection Act (SIPA) and filed an application with the United States District Court for the Southern District of New York for a declaration that the customers of MF Global Inc. are in need of the protections available under the SIPA.

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