Four Banks Fined $120 Million for ‘Mis-Selling’ Derivatives in Milan

Four Banks Fined $120 Million for ‘Mis-Selling’ Derivatives in Milan

On Wendesday an Italian court found Depfa Bank, UBS (UBSN.VX), JPMorgan (JPM.N) and Deutsche Bank (DBKGn.DE) guilty of fraud. The banks were found guilty of “mis-selling derivatives” (Reuters) to Milan; the four banks were also accuse of lying about the inherent risks of the contract, as well as making hundreds of millions of dollars in profits from the deal. Additionally, nine bank employees were ordered to a suspended sentence of up to eight months in jail.

Derivatives Penalty Brings Large Fine

The court ordered the state to seize roughly $120 million from the banks, which were each fined $1.3 million. For UBS, the fine comes on the heels of a $1.5 billion penalty from the U.S. Government, and particularly the CFTC, for rigging Libor. Apparently the manipulation can be traced back to a swap contract signed by Milan city council in 2005.

“This is an historic sentence because it has recognised the principle that banks’ dealings with the public administration must be transparent,” prosecutor Alfredo Robledo told reporters.

Deutsche Bank, JP Morgan and UBS plan to appeal.

“The evidence at the trial demonstrated conclusively that the individuals behaved entirely honestly and appropriately throughout and that the transactions complied with Italian and English law,” the JPMorgan said in a statement.

CFTC Settles Charges Against Virginia Commodity Schemes

The U.S. Commodity Futures Trading Commission (CFTC) yesterday announced that it obtained a federal court order requiring Alexander Giap of Viriginia to pay $456,743 in restitution to defrauded customers and a $250,000 civil monetary penalty for violating the anti-fraud provisions of the Commodity Exchange Act (CEA).

The court found that Giap perpetrated two schemes in which he acted as an unregistered Commodity Trading Advisor (CTA). Giaps first scheme involved iTRADE, a purported “school” that Giap used to conduct his CTA business.

iTRADE “students” provided Giap with “tuition” ranging from $4,000 to $20,000 and traded under Giap’s direction, the order finds. Giap and iTRADE offered a money back guarantee under which the iTRADE students would retain all profits from trading until they had recovered their initial deposit, the order finds. However, Giap’s trading resulted in substantial losses, losing money seven out of the nine months from January 2009 through September 2009, according to the order.

Giap also failed to disclose “material facts when he solicited customers to engage his services, including that he was a convicted felon who still owed restitution relating to his criminal conviction and was subject to Internal Revenue Service liens for delinquent taxes.”

Read the statement here.

About The Author

Elan Mendel

Elan Mendel

Elan Mendel is an associate with Shipkevich PLLC, and has done registration, compliance, and enforcement defense work for commodities, futures and forex firms registered with the CFTC and NFA as FCMs, RFEDs, and others. Elan also specializes in domestic and cross-border insolvency issues.

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