The Commodity Futures Trading Commission announced that a federal court entered a consent order resolving the CFTC’s action against defendants Kraft Foods Group and Mondelēz Global.
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The consent order includes an injunction and requires payment of a $16 million penalty.
The order by the Honorable Judge John Robert Blakey of the U.S. District Court for the Northern District of Illinois, stems from a complaint filed by the CFTC in 2015.
The U.S. Commodity Futures Trading Commission (CFTC) on April 1, 2015. announced the filing of a civil enforcement Complaint in the U.S. District Court for the Northern District of Illinois against Kraft Foods Group, Inc. and Mondelēz Global LLC, headquartered in Northfield and Deerfield, Illinois, respectively, for manipulation and attempted manipulation of the prices of cash wheat and wheat futures.
The Complaint also alleged that Kraft and Mondelēz violated speculative position limits by holding wheat futures positions in excess of speculative position limits established by the CFTC and the Chicago Board of Trade (CBOT) without a valid hedge exemption or a bona fide hedging need, and engaged in numerous noncompetitive trades in CBOT wheat.
According to the CFTC Complaint, in response to high cash wheat prices in late Summer 2011, Kraft and Mondelēz developed, approved, and executed in early December 2011 a strategy to buy $90 million of December 2011 wheat futures, which amounted to a six-month supply of wheat.
The CFTC Complaint alleged that Kraft and Mondelēz never intended to take delivery of this wheat and instead executed this strategy expecting that the market would react to their enormous long position by lowering cash wheat prices and strengthening the spread between December 2011 wheat and March 2012 wheat futures.
Those price shifts did occur and, according to the CFTC Complaint, Kraft and Mondelēz earned over $5.4 million in profits.
Finally, the CFTC Complaint alleged that beginning in or about 2003 and continuing through January 2014, prior to each of the five annual delivery periods for CBOT wheat, Kraft and MondelÄ“z conducted off-exchange futures transactions between two separate corporate trading accounts that did not comply with exchange rules for noncompetitive, off-exchange futures trades. ■