15 Sep 23

Responding to Target Letters From the CFTC

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Last Updated on: 2nd October 2023, 05:51 pm

Responding to Target Letters From the CFTC

Getting a target letter from the Commodity Futures Trading Commission can feel really scary. It means they’re investigating you for potentially breaking commodities trading laws. I know it’s stressful, but try not to freak out! With the right approach, you can get through this. I’ll walk you through what to do step-by-step.

What is the CFTC?

The CFTC is the government agency that oversees trading of commodity futures and options – things like agricultural goods, currencies, and energy products. They enforce laws like the Commodity Exchange Act that prohibit fraud, manipulation, and shady practices in the commodities markets.

What is a target letter?

A target letter says you’re under investigation by the CFTC. Essentially, they think you may have violated the law and want to interview you. The letter will say which specific laws they believe you broke.Getting a target letter doesn’t guarantee you’ll be charged. But it does mean the CFTC has some evidence against you and it’s a serious investigation. Don’t ignore the letter – you need to take action.

What should I do if I get a target letter?

Here are the key steps if you get a CFTC target letter:

  1. Don’t panic – getting a lawyer can really help
  2. Carefully review the letter so you understand the allegations
  3. Gather relevant documents and information
  4. Hire an experienced commodities lawyer
  5. Consider negotiating a settlement
  6. Don’t destroy evidence or obstruct justice

Having a knowledgeable white collar defense attorney on your side is crucial. They can help navigate the complex laws and build the strongest case for you.

Step 1: Don’t Panic – Getting a Lawyer Can Help

It’s totally normal to feel anxious if you get one of these letters. But don’t freak out or do anything rash. Having an experienced legal advisor on your side can make all the difference. A lawyer who knows commodities fraud cases can recommend the best response. They’ll ensure your rights are protected throughout the investigation. And they can interact with investigators so you don’t have to.

Step 2: Carefully Review the Letter

Read through the target letter closely. Make sure you understand exactly what violations the CFTC thinks happened. The letter should cite specific provisions of laws like the Commodity Exchange Act that you allegedly violated. Common accusations include:

  • Fraud or manipulation in trading commodities
  • Providing false information to the CFTC
  • Violating position limits in commodity markets
  • Operating illegally as an unregistered CFTC entity

Knowing the precise allegations is key for responding properly. Your lawyer can explain the significance of the laws cited.

Step 3: Gather Relevant Documents

Next, start gathering all documents, records, communications, and other evidence relevant to the investigation. This includes things like:

  • Trading records
  • Account statements
  • Emails and phone logs
  • Notes and calendars
  • Internal policies and procedures

Your lawyer can help identify the most important documents to collect. Organizing this information will aid your defense.

Step 4: Hire an Experienced Lawyer

Perhaps the most critical step is hiring an experienced commodities fraud lawyer. Find someone very knowledgeable about CFTC laws and investigations. Only an expert attorney can provide tailored advice for your specific situation.In your consultation, the lawyer will evaluate the seriousness of the allegations. They’ll explain your rights and options. Based on their experience with similar cases, they can assess your potential liability. Most importantly, the right lawyer will start building a defense strategy – either contesting the charges or seeking a favorable settlement.

Step 5: Consider Negotiating a Settlement

In many CFTC cases, settlement is the best outcome. Your lawyer can negotiate with the prosecutors to potentially:

  • Avoid criminal charges
  • Reduce fines and penalties
  • Prevent a trading ban or license revocation

Settlements often require admitting wrongdoing and taking remedial measures. But they allow avoiding long court battles. Your lawyer will advise if settlement seems prudent in your case.

Step 6: Don’t Destroy Evidence

It’s absolutely vital not to destroy any evidence after getting a target letter. Doing so can lead to serious obstruction of justice charges. Be sure to preserve all relevant documents and communications. You should also not discuss the investigation with others, as accidentally tipping off suspects could obstruct the CFTC’s work. Let your lawyer handle all communication about the case.

What Tactics Do CFTC Investigators Use?

CFTC investigators have broad authority to gather evidence in commodities fraud investigations. Some techniques they often use include:

  • Asking for voluntary cooperation – they may request you provide information willingly, but you can refuse or speak through your lawyer instead.
  • Issuing subpoenas demanding documents, communications, or testimony – your lawyer can help appropriately respond.
  • Surveillance of trading patterns to detect potential manipulation.
  • Undercover operations using informants and cooperating witnesses.
  • Interviews of suspects and witnesses.

Having legal counsel helps properly handle these aggressive investigative tactics. Your lawyer will protect your rights while cooperating as needed.

What Are the Stages of a CFTC Investigation?

CFTC probes typically follow several standard phases:

  • Preliminary inquiry – The CFTC first detects possible misconduct and starts gathering basic facts.
  • Formal investigation – If initial findings warrant, a formal probe opens granting subpoena power.
  • Wells notice – Targets are notified of charges and can argue why the case should be dismissed.
  • Settlement or charges – The CFTC either negotiates a settlement or files formal civil or criminal charges.

The process usually takes months to years depending on the complexity of the case. Your lawyer will guide you through each phase.

What Are the Consequences of a CFTC Investigation?

The potential penalties depend on the specific violations alleged. According to CFTC rules, consequences can include:

  • Fines up to triple the amount gained from illegal activity or $1 million, whichever is higher.
  • Disgorgement of all ill-gotten gains.
  • Trading bans preventing futures market participation.
  • License revocation for brokers and advisors.
  • Jail time up to 10 years for criminal violations.

Lesser settlements are common but still carry substantial fines. Having an experienced legal team helps minimize penalties.

Can I Go to Jail for Commodities Fraud?

Yes, commodities fraud can potentially lead to criminal charges and jail time. If the CFTC believes violations were intentional and egregious, they may refer the case to the Department of Justice for criminal prosecution.Potential criminal charges related to commodities trading include wire fraud, mail fraud, false statements, and conspiracy. These carry sentences up to 10 years in prison. However, criminal charges are less common in CFTC cases. In many instances, experienced counsel can help keep matters civil and negotiate reduced penalties.

What’s the Best Defense Strategy?

There’s no one perfect defense for CFTC cases. The best approach depends on the specific circumstances of your case. But some effective strategies include:

  • Demonstrating you acted in good faith without intent to defraud.
  • Showing the alleged misconduct was an accident or mistake.
  • Arguing the trading patterns have legitimate economic explanations.
  • Highlighting compliance measures and cooperating with the investigation.

The right lawyer will evaluate which defenses make the most sense for you. Having experienced counsel maximizes your chances of success.

Should I Testify or Give an Interview?

Generally, it’s best not to testify or give interviews during a CFTC investigation. Anything you say can be used against you. Your lawyer can interact with investigators for you. They may eventually recommend an interview if it could help resolve the case favorably. But only after careful consultation.

Take a Deep Breath, You’ll Get Through This

Getting a target letter is scary. But thousands have gone through CFTC investigations and come out okay. With the right legal advice and smart strategy, you can too. The key is staying calm, getting organized, and having an experienced attorney protect your interests. While it won’t be fun, taking the right steps will put you in the best position. You’ve got this!Let me know if you have any other questions! I’m always happy to help walk through this process.