Kraft and Mondelez to pay $16 million in wheat manipulation case
Christian Fernsby ▼ | August 15, 2019
The U.S. Commodity Futures Trading Commission announced that it obtained a $16 million penalty and injunction pursuant to a federal court’s entry of a consent order against defendants Kraft Foods Group, Inc. and Mondelez Global LLC.Article continues below
Topics: KRAFT MONDELEZ WHEAT >
The order, entered on August 14, 2019 by the Honorable Judge John Robert Blakey of the U.S. District Court for the Northern District of Illinois, resolves the CFTC’s complaint alleging, among other things, manipulation of the wheat market.
The $16 million penalty is approximately three times defendants’ alleged gain.
The order also enjoins Kraft and Mondelez from engaging in future violations of the manipulation, wash trade, and position limit provisions of the Commodity Exchange Act and CFTC regulations charged in the complaint.
The CFTC complaint alleged that in response to high cash wheat prices in late summer 2011, Kraft and Mondelez developed, approved, and executed a manipulative strategy to purchase and stand for delivery on more than 3,000 futures contracts (approximately $90 million) of Soft Red Winter (SRW) Wheat in the December 2011 expiration to send the market a false signal that the defendants had demand for — and would use — futures wheat to source the defendants’ wheat supply requirements in their Toledo mill.
The complaint alleged that, in fact, Kraft and Mondelez had no intention of sourcing wheat from the futures market, and the $90 million of wheat futures at issue far exceeded their actual sourcing needs.
As alleged, Kraft’s and Mondelez’s true goal was to narrow the price spread between the December 2011 and deferred-month wheat futures contracts, thereby causing the market to sell cash wheat to Kraft and Mondelez at lower prices, while earning Kraft and Mondelez a profit on their speculative futures positions.
The complaint further alleged that Kraft’s and Mondelez’s actions caused an artificial price that ultimately earned them more than $5 million in profits. ■ What to read next
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