CFTC Charges Former Trader for Engaging in a Fraudulent Scheme to Mismark U.S. Dollar Interest Rate Derivatives

Washington, D.C. — The Commodity Futures Trading Commission today issued an order filing and settling charges against Blaise Brochard of New York, New York, a former trader at a global bank, for engaging in a scheme to mismark positions on the bank’s U.S. dollar interest rate derivatives desk (IRD Desk). The order requires Brochard to pay a $250,000 penalty, cease and desist from violating applicable provisions of the Commodity Exchange Act (CEA) and CFTC regulations, and comply with certain conditions and undertakings, including a three-year ban on trading commodity interests for or on behalf of other persons or entities. 

“Mismarking schemes undermine the fairness and integrity of the markets, and we will vigorously pursue such misconduct and hold individuals accountable, where appropriate,” said CFTC Acting Director of Enforcement Gretchen Lowe.

Case Background

The order finds that between January 2015 and at least April 2018, Brochard, a trader on the IRD Desk, submitted false or misleading entries in the swap dealer’s internal recordkeeping and accounting system relating to the marking of the end-of-day USD LIBOR forward curve (Closing Curve), for the purpose of inflating the unrealized profit & loss (P&L) of the IRD Desk and disguising significant trading losses. Brochard engaged in a pattern of marking the Closing Curve in a manner that varied from observed mid-market prices and in a manner that aligned with the risk positions of the IRD Desk, while generally staying within the limits of internal controls designed to detect mismarking. At its peak in early 2018, Brochard’s mismarking of the Closing Curve overstated the P&L of the IRD Desk by approximately $25 million.

In accepting Brochard’s offer of settlement, the CFTC recognizes his substantial cooperation during the Division of Enforcement’s investigation of this matter. The CFTC notes that Brochard’s cooperation was recognized in the form of a reduced civil monetary penalty.

The CFTC acknowledges and appreciates the cooperation and assistance of France’s Autorité des marchés financiers and the National Futures Association (NFA) with this matter.

Division of Enforcement staff members responsible for this action are Trevor Kokal, John Buffington, John C. Murphy, David Oakland, Patryk J. Chudy, Lenel Hickson, Jr., and Manal M. Sultan. Pamela Geraghty from the Market Participants Division and Owen Kopon of the Division of Market Oversight assisted with this matter.