CFTC Charges Puerto Rico Resident and His Firm for Misappropriation of Nonpublic Information and Fictitious Trading

Washington, D.C. — The Commodity Futures Trading Commission announced today that it has filed a civil enforcement action in the U.S. District Court for the Southern District of Texas against Peter Miller, a resident of San Juan, Puerto Rico, and his firm Omerta Capital LLC. 

The complaint charges the defendants for receiving tipped confidential block trade order information belonging to an energy company from a trader at that company, and in turn trading on the basis of this information, including entering into non-arm’s length, fictitious block trades in natural gas futures on the basis of this information, in violation of the Commodity Exchange Act (CEA) and CFTC regulations. 

“The CFTC is committed to pursuing all those who misappropriate material, nonpublic information, not only those who improperly disclose such information but also those who receive such information and trade on it for their personal profit,” said Acting Director of Enforcement Vincent McGonagle. “Such misconduct undermines market integrity and public trust in our markets.” 

The CFTC seeks civil monetary penalties, disgorgement, restitution, registration and trading bans, and a permanent injunction against further violations of the CEA and CFTC regulations. 

Case Background

According to the complaint, from August 2015 through December 2018, Miller received block trade order information that was disclosed by a trader employed by an energy company in breach of that trader’s duty of trust and confidence to their employer. This trader disclosed this information to one of two energy brokers, who in turn passed this information on to Miller. Miller, through Omerta, traded on the basis of this information by (1) entering into non-arm’s length, fictitious block trades in financially-settled natural gas futures contracts with the energy company and (2) entering into trades involving physically-delivered natural gas futures for the same quantity and contract month. Miller traded in this manner as part of a spread trading strategy in which he sought to profit from the relative movement in the prices of the two natural gas futures contracts. By trading on the basis of the energy company’s information, Miller was able to obtain advantageous prices for his block trades and sequence his trading of the two contracts in a manner that maximized his ability to profit through this strategy. In total, Miller generated over $1.5 million in trading profits by trading in this manner. Miller shared a portion of these profits with both the energy company trader and the broker involved in the scheme.

The Division of Enforcement staff members responsible for this case are Alison Auxter, Clemon Ashley, Lauren Fulks, Daniel Contrastano, Brandon Wozniak, Thomas Simek, Christopher Reed, and Charles Marvine.