GENEVA – A commodity futures trading company in Geneva and one of its principals were ordered to pay nearly $1.2 million in restitution and civil penalties, according to the Commodity Futures Trading Commission, and to pay an additional $680,000 in restitution and penalties, according to the Chicago Mercantile Exchange Group’s notices of disciplinary action.
Foremost Trading LLC, at 28 N. Bennett St., Geneva and Batavia resident Mark Miller, 44, were named in two commodities orders July 6 and a news release detailing instances of fraud and theft by Miller and Foremost Trading LLC’s failure to supervise his handling of customer accounts.
“Customers need to be able to trust the professionals they empower to trade their accounts,” Commodity Futures Trading Commission Director of Enforcement James McDonald stated in the release. “When someone trading on behalf of a customer commits fraud or trades in a fictitious manner, the commission will act to address the misconduct, including through bans on trading for others.”
Robert Miller, principal and chief financial officer of Foremost Trading, said Mark and Scott Miller are his sons.
Robert Miller said he would not talk about how the company is handling the situation, nor how it planned to stay in business, nor how it will pay the fines and restitution.
“These are charges and not the results of a final criminal or civil lawsuit,” Robert Miller said. “This is an industry event. I can’t talk about to any extent. In our settlement, we agreed not to talk about it.”
The settlement actually states, inpart, that the company, nor any of its agents or employees, “shall take any action or make any public statement denying, directly or indirectly, any findings or conclusions in this order or creating or tending to create, the impression that this order is without a factual basis.”
“I’m not going to address how we’re handling it. It remains to be seen,” Robert Miller said. “I will not discuss these problems."
As to the safety of current clients’ funds, Robert Miller said, “Every client with us – their funds are 100% safe and has nothing to do with this matter.”
The Commodity Futures Trading Commission is an independent federal agency that regulates the derivatives markets, including futures, options and swaps.
Without admitting or denying the findings and conclusions, both Mark Miller and Foremost submitted settlement offers to both the commission and the Chicago Mercantile Exchange, which were accepted, according to the commodity’s orders and the exchange's disciplinary reports.
According to the Secretary of State business service records, Foremost Trading LLC is owned by Robert Miller, Scott Miller and Mark Miller. They also own Foremost Capital Management at the same Bennett Street address.
The same three family members also own the Bennett Street property through Washington Gates, LLC, Secretary of State records show.
Mark Miller suspended from trading
The commodity’s orders require Mark Miller to pay a $250,000 civil monetary penalty, Foremost to pay a $200,000 civil monetary penalty, and Mark Miller and Foremost to pay, jointly and severally, $723,013 in restitution to the customer who was defrauded.
According to the commission’s news release, Mark Miller is suspended from trading or commodity interests for two years and permanently prohibited from applying for registration, claiming exemption from registration and from engaging in any activity requiring registration with the commission.
According to the commission’s orders, starting in February 2014 and lasting through at least August 2016, Mark Miller orchestrated at least 45 round-turn unauthorized, fictitious trades between proprietary accounts he owned with family members, and a customer’s accounts over which he had trading authority, according to the release.
A round-turn is a cycle in which a security is bought and sold, or an investment position is opened and closed.
Unauthorized trades are trades that a broker makes for a customer without the customer's permission or authorization.
Through the round-turn unauthorized fictitious trades, Mark Miller transferred money out of Customer A’s account and into a Miller family account, according to the order.
Mark Miller also engaged in almost 500 other unauthorized, fictitious trades for this customer.
Failure to supervise Mark Miller
Foremost Trading, which was liable for Mark Miller’s conduct, failed to supervise his handling of accounts, which allowed the fraud to continue for years, according to the order.
“Any diligent review of (Mark) Miller’s trading of various proprietary accounts in conjunction with his trading of customer accounts would have revealed his unauthorized fictitious trades with Customer A,” according to the order. “However, Foremost’s principal in charge of compliance was unaware of these trades until after the investigation into this misconduct began.”
Foremost also had no policy of reviewing the trading in proprietary and non-customer accounts and never reviewed Mark Miller’s trading, the order stated.
“Any reasonable review of trading in Miller’s accounts would have revealed the repeated intentional round-turn unauthorized fictitious trades that stole money from Customer A and the other unauthorized fictitious trades with Customer A’s accounts,” the order stated.
Also, Mark Miller misappropriated funds from the customer by reporting phony errors to their futures commission merchant and by requesting that winning trades be moved into the proprietary accounts, the release stated.
“Notably, Foremost rarely reported errors that benefited Customer A," according to the order regarding Foremost. "Using these fraudulent errors, Respondent misappropriated approximately $157,000 from Customer A.”
The Commodity Futures Treading Commission’s investigation was conducted in conjunction with a parallel inquiry by the Chicago Mercantile Exchange Group, which also took disciplinary action against Mark Miller and Foremost.
According to the Chicago Mercantile Exchange Group’s notices of disciplinary action, www.cmegroup.com, a panel of the NYMEX Business Conduct Committee found that Mark Miller “engaged in dishonorable and uncommercial conduct inconsistent with just and equitable principles of trade in crude oil futures and platinum futures.”
Similarly to the commodity commission’s findings, the Chicago Mercantile Exchange Group’s panel found that during the relevant time period, Miller’s trading disadvantaged Customer A’s account in the amount of $479,858.93, according to the notice of disciplinary action.
In a separate notices of disciplinary action against Foremost Trading, the panel ordered Foremost to pay a fine in the amount of $125,000and that Foremost and the Foremost Trader jointly and severally pay restitution in the amount of $479,858.93.
Foremost Trading and Mark Miller neither admitted nor denied the findings of rule violations at a June 25 hearing before the business conduct panel.
The panel also barred Miller from access to any trading floor owned or controlled by CME Group and from direct and indirect access to any designated contract market, derivatives clearing organization or swap execution facility owned or controlled by CME Group for two years, beginning on the effective date and continuing through and including July 6, 2022.
Further, the panel permanently barred Miller from trading on a discretionary basis for or on behalf of any person or entity, whether by power of attorney or otherwise; and from entering customer orders in a brokerage capacity on any Chicago Mercantile Exchange Group Inc.