CFTC Director of Enforcement Ian McGinley on Phantom Cattle Scheme: “There’s a saying about people who pretend to be something they’re not: they’re ‘all hat and no cattle.’"
“Easterday cheated his best customer by lying about non-existent cattle, lied to an exchange, and broke exchange rules."
Link to order: https://www.cftc.gov/media/8681/enfcodyeasterday060523/download
A consent order was entered against Easterday Ranches on December 17, 2021. [See CFTC Press Release Nos. 8425-21, 8471-21]
Highlights:
The Commodity Futures Trading Commission today announced Chief Judge Stanley A. Bastian of the U.S. District Court for the Eastern District of Washington issued an order granting a permanent injunction against Cody Easterday and requiring him to pay a $1 million civil monetary penalty in connection with a phantom cattle fraud scheme.
- In a parallel criminal action, Easterday previously was sentenced to 11 years in prison and ordered to pay $244 million in restitution. [United States v. Easterday, No. 21-cr-6012-SAB (E.D. Wash.)]
- The order stems from a CFTC complaint filed on March 31, 2021, charging Cody Easterday and Easterday Ranches, Inc. with the sale of more than 200,000 non-existent head of cattle to a beef processor, making false statements to an exchange, and exceeding the number of contracts permitted by exchange-set position limits
- “There’s a saying about people who pretend to be something they’re not: they’re ‘all hat and no cattle.’ That perfectly describes Easterday,” said Director of Enforcement Ian McGinley. “Easterday cheated his best customer by lying about non-existent cattle, lied to an exchange, and broke exchange rules. The CFTC remains focused on protecting our agricultural markets and will aggressively prosecute cases to ensure that bad actors are barred from those markets.”
- According to the order, from approximately October 2016 to November 2020, Easterday caused Easterday Ranches to submit false invoices and reimbursement requests relating to more than 200,000 head of cattle that it never purchased or raised on the processor’s behalf.
- Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received more than $233 million to which it was not entitled.
TLDRS:
CFTC Director of Enforcement Ian McGinley on Phantom Cattle Scheme: “There’s a saying about people who pretend to be something they’re not: they’re ‘all hat and no cattle.’" “Easterday cheated his best customer by lying about non-existent cattle, lied to an exchange, and broke exchange rules."
- Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received more than $233 million to which it was not entitled.
- So CFTC is capable of going after phantom schemes, now do naked short schemes and release the Swaps data!!!
The Commodity Futures Trading Commission today announced Chief Judge Stanley A. Bastian of the U.S. District Court for the Eastern District of Washington issued an order granting a permanent injunction against Cody Easterday and requiring him to pay a $1 million civil monetary penalty in connection with a phantom cattle fraud scheme. In a parallel criminal action, Easterday previously was sentenced to 11 years in prison and ordered to pay $244 million in restitution. [United States v. Easterday, No. 21-cr-6012-SAB (E.D. Wash.)]
In addition to requiring Easterday to pay $1 million civil monetary penalty, the order permanently enjoins Easterday from further violating the Commodity Exchange Act and CFTC regulations, as charged. The order also permanently prohibits Easterday from trading on or subject to the rules of any CFTC-registered entity and from engaging in any activities requiring CFTC registration.
The order stems from a CFTC complaint filed on March 31, 2021, charging Cody Easterday and Easterday Ranches, Inc. with the sale of more than 200,000 non-existent head of cattle to a beef processor, making false statements to an exchange, and exceeding the number of contracts permitted by exchange-set position limits. A consent order was entered against Easterday Ranches on December 17, 2021. [See CFTC Press Release Nos. 8425-21, 8471-21]
“There’s a saying about people who pretend to be something they’re not: they’re ‘all hat and no cattle.’ That perfectly describes Easterday,” said Director of Enforcement Ian McGinley. “Easterday cheated his best customer by lying about non-existent cattle, lied to an exchange, and broke exchange rules. The CFTC remains focused on protecting our agricultural markets and will aggressively prosecute cases to ensure that bad actors are barred from those markets.”
Case Background
According to the order, from approximately October 2016 to November 2020, Easterday caused Easterday Ranches to submit false invoices and reimbursement requests relating to more than 200,000 head of cattle that it never purchased or raised on the processor’s behalf. Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received more than $233 million to which it was not entitled.
In addition, the order finds that Easterday caused Easterday Ranches to report false or misleading information concerning its cattle inventory, purchases, and sales to the Chicago Mercantile Exchange in at least two hedge exemption applications seeking permission to exceed the exchange’s position limits. These false statements to the exchange were made in 2017 and 2018 to avoid disciplinary actions and scrutiny when Easterday Ranches exceeded exchange-based position limits in the live cattle and feeder cattle futures markets. Because they were based on false or misleading information, the hedge exemptions were invalid. As a result, Easterday Ranches violated exchange-set position limit violations on at least two occasions.
The Division of Enforcement staff responsible for this matter are Ben Sedrish, Joseph Patrick, Ashley Burden, Allison V. Passman, Margaret Aisenbrey, William Janulis, Scott Williamson, and Robert T. Howell.
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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.