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CFTC Charges Washington State Rancher And Feedyard With $233 Million Phantom Cattle Fraud Scheme

Date 01/04/2021

The CFTC’s complaint seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans as to Easterday, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations, as charged.

“The Commission will vigorously prosecute fraud committed in connection with derivatives trading, including making false statements to exchanges to exceed the applicable limits on their positions,” said Acting Director of Enforcement Vincent McGonagle.

According to the complaint, Easterday accumulated more than $200 million in losses over a 10-year period from speculative trading in the cattle futures markets. To meet margin calls, Easterday devised a scheme to defraud one of his biggest business partners, a South Dakota-based beef producer. The complaint alleges that, from at least 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 Easterday Ranches never actually purchased or raised on the producer’s behalf. Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received from the producer more than $233 million to which it was not entitled.

In addition, the complaint alleges 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. Easterday allegedly made the false statements to the exchange 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 members responsible for this case are Ben Sedrish, Ashley J. Burden, Joseph Patrick, Yusuf Capar, Allison V. Passman, Scott Williamson, and Robert Howell.