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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.1 Page 1 of 24
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`Benjamin E. Sedrish
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`Ashley J. Burden
`Allison V. Passman
`Commodity Futures Trading Commission
`525 W. Monroe St., Ste. 1100
`Chicago, IL 60661
`Tel. (312) 596-0700
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`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF WASHINGTON
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`COMMODITY FUTURES TRADING
`) Case No.: 4:21-cv-5050
`COMMISSION,
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` ) COMPLAINT FOR
`Plaintiff,
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`) INJUNCTIVE RELIEF,
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`) CIVIL MONETARY
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`vs.
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`) PENALTIES, AND OTHER
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`) EQUITABLE RELIEF
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`CODY EASTERDAY, EASTERDAY
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`RANCHES, INC.,
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`) JURY TRIAL REQUESTED
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`)
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`Defendants.
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`____________________________________)
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`Plaintiff Commodity Futures Trading Commission (“Commission” or
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`“CFTC”), an independent federal agency, alleges as follows:
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`SUMMARY
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`For more than 10 years, Defendant Cody Easterday accumulated
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`1.
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`staggering losses speculatively trading in the cattle futures markets, ultimately
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`amassing more than $200 million in losses in his personal and corporate accounts.
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`1
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`To meet margin calls, Easterday concocted a scheme to defraud one of his biggest
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`business partners.
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`2.
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` Beginning in or before October 1, 2016 and continuing to at least
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`December 1, 2020 (“Relevant Period”), Defendants Easterday Ranches, Inc.
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`(“Easterday Ranches”) and Cody Easterday operated a scheme to defraud a producer
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`of beef and pork products (“Producer”) out of more than $233 million by submitting
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`to the Producer fabricated invoices for reimbursement for cattle that Easterday
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`Ranches had agreed to purchase and care for on behalf of the Producer.
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`3.
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`In or around November 2020, Cody Easterday admitted to a Producer
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`representative that he had caused Easterday Ranches to submit invoices to the
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`Producer for cattle that never existed, and that he did so to generate money to cover
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`millions of dollars of losses he and Easterday Ranches incurred while engaging in
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`speculative trading in the cattle and corn futures markets.
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`4.
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`In furtherance of the fraud, in at least 2017 and 2018, Easterday caused
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`Easterday Ranches to submit false cattle inventory, purchase, and sales figures to the
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`Chicago Mercantile Exchange (“CME”) in two hedge exemption applications to
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`seek permission to exceed the exchange’s speculative position limits and avoid
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`disciplinary action.
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`5.
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`Because Easterday Ranches was not entitled to any hedge exemptions
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`as a result of the false information in its hedge exemption applications, Easterday
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`2
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`Ranches, through Easterday’s actions, violated CME’s position limits in 2017 and
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`2018.
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`6.
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`Easterday also admitted to the fraud and false statements to the CME to
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`the Department of Justice in or about March 2021.
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`7.
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`By engaging in the conduct summarized above, Defendants violated the
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`Commodity Exchange Act (“Act”), 7 U.S.C. §§ 1–26 (2018), and accompanying
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`regulations (“Regulations”), 17 C.F.R. pts. 1–190 (2020). Namely, by this conduct
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`and further conduct described below, Defendants have engaged in acts and practices
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`in violation of the following:
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`a. Section 6(c)(1) of the Act, 7 U.S.C. § 9(1) (2018), and Regulation
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`180.1(a)(1)–(3), 17 C.F.R. § 180.1(a)(1)–(3) (2020), which prohibit
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`fraud in connection with commodity transactions;
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`b. Section 9(a)(4) of the Act, 7 U.S.C. § 13(a)(4) (2018), which prohibits
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`false statements to entities registered under the Act; and
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`c. Section 4a(e) of the Act, 7 U.S.C. § 6a(e) (2018), which prohibits
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`exceeding position limits established by exchanges.
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`8.
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`Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1
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`(2018), the Commission brings this action to enjoin Defendants’ unlawful acts and
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`practices and to compel Defendants’ compliance with the Act and Regulations.
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`3
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`In addition, the Commission seeks civil monetary penalties and
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`remedial ancillary relief, including, but not limited to, trading and registration bans,
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`restitution, disgorgement, pre- and post-judgment interest, and such other relief as
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`the Court may deem necessary and appropriate.
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`JURISDICTION AND VENUE
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`10. This Court has jurisdiction over this action under 28 U.S.C. § 1331
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`(2018) (federal question jurisdiction) and 28 U.S.C. § 1345 (2018) (district courts
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`have original jurisdiction over civil actions commenced by the United States or by
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`any agency expressly authorized to sue by Act of Congress). Section 6c(a) of the
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`Act, 7 U.S.C. § 13a-1(a) (2018), authorizes the Commission to seek injunctive relief
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`against any person whenever it shall appear that such person has engaged, is
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`engaging, or is about to engage in any act or practice that violates any provision of
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`the Act or any rule, regulation, or order promulgated thereunder.
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`11. Venue properly lies with this Court pursuant to 7 U.S.C. § 13a-1(e)
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`because Defendants are found in and inhabit the Eastern District of Washington,
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`Defendants transacted business in this District, and the acts and practices in
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`violation of the Act and Regulations occurred within this District, among other
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`places.
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`4
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` PARTIES
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`12. Plaintiff Commodity Futures Trading Commission is the
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`independent federal regulatory agency charged with the administration and
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`enforcement of the Commodity Exchange Act and Regulations promulgated
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`thereunder.
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`13. Defendant Cody Easterday is an individual who, during the Relevant
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`Period, was a co-owner and co-manager of Easterday Ranches. On information and
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`belief, Cody Easterday resides in Mesa, Washington. Easterday has never been
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`registered with the Commission.
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`14. Defendant Easterday Ranches, Inc. is a Washington corporation with
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`its principal place of business in Pasco, Washington. Easterday Ranches filed for
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`bankruptcy protection on February 1, 2021. Easterday Ranches has never been
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`registered with the Commission in any capacity.
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` FACTS
`A. The Producer and Easterday Ranches’ Business Relationship
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`15. The Producer is part of a family of companies that together constitute
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`one of the largest food suppliers in the world. The Producer, which is headquartered
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`in South Dakota, operates a beef processing plant in Pasco, Washington.
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`16. Dating back to at least 2010, Easterday Ranches entered into a series of
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`cattle feeding agreements with the Producer, pursuant to which Easterday Ranches
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`would purchase and fatten cattle for delivery to the Producer.
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`5
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`17. For almost all of the Relevant Period, the business relationship between
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`the Producer and Easterday Ranches was governed by a February 20, 2017 Cattle
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`Feeding Agreement (“Agreement”), under which Easterday Ranches agreed to
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`procure or care for up to 145,000 to 180,500 head of cattle per year for the Producer.
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`Pursuant to an August 20, 2020 amendment, the Agreement’s term was extended
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`through August 20, 2021.
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`18. Cody Easterday, as President of Easterday Ranches, signed both the
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`Agreement and the August 2020 amendment thereto.
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`19. Cody Easterday also signed a personal guaranty of the Agreement,
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`“unconditionally, irrevocably, and absolutely guarantee[ing], as primary obligor[]
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`and not as suret[y], the full and timely payment, performance, and satisfaction by
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`EASTERDAY RANCHES, INC. of all their obligations to [the Producer] pursuant
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`to the terms of this agreement.”
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`20. Under the Agreement, Easterday Ranches agreed to purchase, feed, and
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`manage the purchased cattle “to an acceptable finished weight,” at which point the
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`cattle would be delivered to the Producer’s Pasco, Washington plant for slaughter.
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`Until delivery, Easterday Ranches was entitled to reimbursement for the initial
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`purchase price, plus periodic reimbursement for certain “grow costs” according to a
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`procedure set forth in the Agreement whereby Easterday Ranches would bill the
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`Producer twice monthly for such costs.
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`21. Upon delivery of the fattened cattle, Easterday Ranches would be
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`reimbursed pursuant to compensation according to schedule set forth in the
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`Agreement.
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`B. Cody Easterday Admits to Defrauding the Producer
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`22. At all relevant times, Easterday and Easterday Ranches each
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`maintained futures trading accounts that traded livestock and grain futures.
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`Easterday controlled the futures trading in the trading accounts in his name and in
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`Easterday Ranches’ name.
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`23. For more than 10 years, Easterday engaged in speculative trading in the
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`cattle futures markets in Easterday Ranches’ corporate accounts and his personal
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`trading accounts. His trading resulted in millions of dollars of losses every year,
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`ultimately totaling more than $200 million. The vast majority of those trading
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`losses occurred in the corporate accounts. To cover margin calls, Easterday devised
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`a scheme to defraud the Producer.
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`24. Beginning in or around October 2016, Easterday knowingly and
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`intentionally prepared false invoices and caused Easterday Ranches to submit them
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`to the Producer for the purpose of deceiving the Producer. Using these false
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`invoices, Easterday intended to induce the Producer to pay for both purchases and
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`grow costs of more than 200,000 “ghost cattle” that Easterday Ranches had never
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`actually purchased or cared for.
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`25. These false invoices were submitted by Easterday Ranches from its
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`Pasco, Washington offices to the Producer’s headquarters in South Dakota, where
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`an employee would review and then approve the false invoices for reimbursement.
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`26. Given the parties’ long business relationship, the Producer justifiably
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`relied on the invoices submitted by Easterday Ranches and paid Easterday Ranches
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`more than $233 million to which it was not entitled. The Producer never took
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`delivery of the 200,000 ghost cattle for which it had reimbursed Easterday Ranches.
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`27. Easterday admitted to this fraudulent scheme in or around November
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`2020 when confronted by a Producer representative with evidence of the fraud.
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`Easterday further admitted to the fraud in or around March 2021 to the Department
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`of Justice. Easterday acknowledged that he engaged in the fraudulent scheme to
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`cover losses he incurred engaging in speculative trading in the cattle and corn
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`futures markets.
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`C. Defendants’ False Statements to CME
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`28. On or around October 16, 2017, a member of CME’s Market
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`Regulation Department emailed Easterday Ranches’ futures commission merchant
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`(“FCM”), noting that Easterday Ranches had carried short positions in feeder cattle
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`futures that exceeded CME speculative position limits. According to the CME
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`email, Easterday Ranches’ intraday high position in feeder cattle contracts on
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`October 13, 2017 was 329, or 29 contracts above the CME exchange-set position
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`limit for feeder cattle.
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`29. This email stated that, if Easterday Ranches wanted to seek an
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`exchange position limit exemption because its short position was being carried for
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`hedging purposes, it would need to fill out applications detailing the physical
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`exposure underlying the hedge positions.
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`30.
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`In response to the CME email, on or around October 17, 2017,
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`Easterday completed and signed on Easterday Ranches’ behalf a CME Group
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`Application to Exceed Position Limits (the “2017 Application”). In the 2017
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`Application, Easterday set forth the cattle inventory at Easterday Ranches as
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`follows:
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`31. Easterday described the Easterday Ranches hedging strategy as
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`follows: “use live & feeder cattle futures to hedge live & feeder cattle inventory.”
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`32. The 2017 Application materially overstated Easterday Ranches’ actual
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`cattle inventory, purchases, and sales.
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`33. Based upon the materially false and misleading information provided
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`by Easterday, who was not engaged solely in bona fide hedging activities to hedge
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`the represented cash risks of Easterday Ranches, on or around October 31, 2017,
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`CME’s Market Regulation Department sent Easterday a letter noting that it had
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`approved the 2017 Application and increased Easterday Ranches’ feeder cattle
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`position limit.
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`34. On or around July 12, 2018, a member of CME Group’s Market
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`Regulation Department emailed Easterday Ranches’ FCM, noting that Easterday
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`Ranches had carried positions in live cattle futures that exceeded CME exchange-set
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`position limits. According to the CME email, Easterday Ranches’ intraday futures-
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`equivalent high position in live cattle contracts on July 11, 2018 was 6,426.645, or
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`126.645 contracts above the CME exchange-set position limit for live cattle.
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`35. This email noted that, if Easterday Ranches wanted to seek an
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`exchange position limit exemption because its short position was being carried for
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`hedging purposes, it would need to fill out applications detailing the physical
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`exposure underlying the hedge positions.
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`In response, on or around July 12, 2018, Easterday completed and
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`signed on Easterday Ranches’ behalf a CME Group Application to Exceed Position
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`(the “2018 Application”). In the 2018 Application, Easterday set forth the following
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`cattle inventory at Easterday Ranches:
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`37. Easterday described the Easterday Ranches hedging strategy as
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`follows: “hedge live cattle inventory using mostly the front month contract as I feel
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`the front month has the most potential weakness.”
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`38. The 2018 Application materially overstated Easterday Ranches’ actual
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`cattle inventory, purchases, and sales.
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`39. Based upon the materially false and misleading information provided
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`by Easterday, who was not engaged solely in bona fide hedging activities to hedge
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`the represented cash risks of Easterday Ranches, on or around July 23, 2018, CME’s
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`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`Market Regulation Department sent Easterday a letter noting that it had approved
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`the 2018 Application and increased Easterday Ranches’ live cattle exchange
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`position limit.
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`40. Easterday has admitted to making false or misleading statements to the
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`CME in connection with the 2017 and 2018 Applications.
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`41. On at least October 13, 2017 and July 11, 2018, Easterday Ranches did
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`not possess a valid hedge exemption permitting it to exceed applicable CME
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`speculative position limits in feeder and live cattle futures, respectively.
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` VIOLATIONS OF THE COMMODITY EXCHANGE ACT AND
`COMMISSION REGULATIONS
`COUNT ONE
`Violations of Section 6(c)(1) of the Act, 7 U.S.C. § 9(1) (2018), and Regulation
`180.1(a)(1)–(3), 17 C.F.R. § 180.1(a)(1)–(3) (2020)
`Fraud in Connection with Contract for Sale or Purchase of Commodities
`in Interstate Commerce
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`42. The allegations set forth in Paragraphs 15–41 above are realleged and
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`incorporated herein by reference.
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`43. Section 6(c)(1) of the Act, 7 U.S.C. § 9(1), makes it unlawful for any
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`person, directly or indirectly, to:
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`[U]se or employ, or attempt to use or employ, in connection
`with ay swap, or a contract of sale of any commodity in
`interstate commerce, or for future delivery on or subject to
`the rules of any registered entity, any manipulative or
`deceptive device or contrivance, in contravention of such
`rules and regulations as the Commission shall promulgate
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
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`by not later than 1 year after [July 1, 2010, the date of
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`enactment of the Dodd-Frank Wall Street Reform and
`Consumer Protection Act] . . . .
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`44. Regulation 180.1(a), 17 C.F.R. § 180.1(a), provides in part:
`
`
`
`
`
`
`
`It shall be unlawful for any person, directly or indirectly, in
`connection with any swap, or contract of sale of any
`commodity in interstate commerce, or contract for future
`delivery on or subject to the rules of any registered entity,
`to intentionally or recklessly:
`
`(1) Use or employ, or attempt to use or employ, any
`manipulative device, scheme, or artifice to defraud;
`
`(2) Make, or attempt to make, any untrue or misleading
`statement of a material fact or to omit to state a material
`fact necessary in order to make the statements made not
`untrue or misleading;
`
`(3) Engage, or attempt to engage, in any act, practice, or
`course of business, which operates or would operate as
`a fraud or deceit upon any person . . . .
`
`45. Cattle are “livestock” and therefore commodities under Section 1a(9) of
`
`
`
`
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`
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`the Act, 7 U.S.C. § 1a(9) (2018).
`
`46. From at least October 2016 through November 2020, as set forth in
`
`Paragraphs 15–41 above, Defendants violated 7 U.S.C. § 9(1) and 17 C.F.R.
`
`§ 180.l(a)(1)–(3) by, among other things, in connection with the sale of commodities
`
`in interstate commerce, submitting to the Producer fraudulent invoices for more than
`
`200,000 head of cattle and receiving reimbursement for the purchase price and grow
`
`costs associated with them.
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`13
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`

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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.14 Page 14 of 24
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`In at least 2017 and 2018, as described in Paragraphs 28–41 above,
`47.
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`
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`
`
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`
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`Defendants violated 7 U.S.C. § 9(1) and 17 C.F.R. § 180.1(a)(1)–(3) by submitting
`
`
`
`to the CME false or misleading statements in hedge exemption applications
`
`concerning Easterday Ranches cattle inventory, purchases, and sales to avoid
`
`disciplinary action and scrutiny from the exchange.
`
`48. Defendants engaged in the acts and practices described above
`
`intentionally or recklessly.
`
`49. By this conduct, Defendants violated 7 U.S.C. § 9(1) and 17 C.F.R.
`
`§ 180.l(a)(1)–(3).
`
`50. Each act of: (a) using or employing, or attempting to use or employ, a
`
`manipulative device, scheme, or artifice to defraud; (b) making, or attempting to
`
`make, untrue or misleading statements of material fact, or omitting to state material
`
`facts necessary to make the statements not untrue or misleading; and (c) engaging,
`
`or attempting to engage, in any act, practice, or course of business, which operated
`
`or would operate as a fraud or deceit upon any person, including but not limited to
`
`those specifically alleged herein, is alleged as a separate and distinct violation of
`
`7 U.S.C. § 9(1) and 17 C.F.R. § 180.l(a)(1)–(3).
`
`51. As set forth in Paragraphs 15–41 above, Easterday violated 7 U.S.C.
`
`§ 9(1) and 17 C.F.R. § 180.l(a)(1)–(3) within the scope of his employment, office or
`
`agency with Easterday Ranches. Easterday Ranches is therefore liable as a principal
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`14
`
`
`
`
`

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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.15 Page 15 of 24
`
`
`for Easterday’s acts, omissions, and failures constituting violations of 7 U.S.C.
`
`
`
`
`
`
`
`
`
`
`
`
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`§ 9(1) and 17 C.F.R. § 180.l(a)(1)–(3) pursuant to Section 2(a)(1)(B) of the Act,
`
`
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`7 U.S.C. § 2(a)(1)(B) (2018), and Regulation 1.2, 17 C.F.R. § 1.2 (2020).
`
`52. As set forth in Paragraphs 13–41 above, Easterday controlled Easterday
`
`Ranches during the Relevant Period. Easterday failed to act in good faith and/or
`
`knowingly induced Easterday Ranches’ violations alleged herein during that time
`
`period. Easterday is therefore liable for Easterday Ranches’ violations as a
`
`controlling person pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c(b) (2018).
`
`Therefore, Easterday is liable directly and as a control person of Easterday Ranches.
`
`COUNT TWO
`Violations of Section 9(a)(4) of the Act, 7 U.S.C. § 13(a)(4) (2018)
`False Statements to a Registered Entity
`
`53. The allegations set forth in Paragraphs 15–41 above are realleged and
`
`incorporated herein by reference.
`
`54. Section 9(a)(4) of the Act, 7 U.S.C. § 13(a)(4) (2018), makes it
`
`unlawful for any person “willfully to . . . make any false, fictitious, or fraudulent
`
`statements or representations . . . to a registered entity, board of trade, . . . or futures
`
`association designated or registered under [the Act] acting in furtherance of its
`
`official duties under [the Act].”
`
`55. CME is a registered entity under Section 1a(40)(A) of the Act, 7 U.S.C.
`
`§ 1a(40)(A) (2018).
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`15
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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.16 Page 16 of 24
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`In at least 2017 and 2018, Defendants submitted inaccurate applications
`56.
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`for position limit exemptions by:
`
`
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`a. Submitting to CME, on or around October 19, 2017, an application
`
`to exceed CME feeder cattle position limits that substantially and
`
`materially overstated Easterday Ranches’ cattle inventory,
`
`purchases, and sales; and
`
`b. Submitting to CME, on or around July 12, 2018, an application to
`
`exceed CME live cattle position limits that substantially and
`
`materially overstated Easterday Ranches’ cattle inventory,
`
`purchases, and sales.
`
`57.
`
`In requesting, receiving, reviewing, and granting the 2017 Application
`
`and the 2018 Application, the CME was acting in furtherance of its official duties
`
`under the Act.
`
`58. Each act of making a false, fictitious, or fraudulent statement or
`
`representation to a registered entity, board of trade, or futures association designated
`
`or registered under the Act or acting in furtherance of its official duties under the
`
`Act is alleged as a separate and distinct violation of 7 U.S.C. § 13(a)(4).
`
`59. As set forth in Paragraphs 13–41 above, Easterday violated 7 U.S.C.
`
`§ 13(a)(4) within the scope of his employment, office, or agency with Easterday
`
`Ranches. Easterday Ranches is therefore liable for Easterday’s acts, omissions, and
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`16
`
`
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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.17 Page 17 of 24
`
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`failures constituting violations of 7 U.S.C. § 13(a)(4) pursuant to 7 U.S.C.
`
`
`
`
`
`
`
`
`
`
`
`
`§ 2(a)(1)(B) and 17 C.F.R. § 1.2.
`
`
`
`
`
`60. As set forth in Paragraphs 13–41 above, Easterday controlled Easterday
`
`Ranches during the Relevant Period. Easterday failed to act in good faith and/or
`
`knowingly induced Easterday Ranches’ violations alleged herein during that time
`
`period. Easterday is therefore liable for Easterday Ranches’ violations as a
`
`controlling person pursuant to 7 U.S.C. § 13c(b). Therefore, Easterday is liable
`
`directly and as a control person of Easterday Ranches.
`
`COUNT THREE
`Violations of Section 4a(e) of the Act, 7 U.S.C. § 6a(e) (2018)
`Exceeding CME Position Limits for Live and Feeder Cattle Futures Contracts
`
`61. The allegations set forth in Paragraphs 15–41 above are realleged and
`
`incorporated herein by reference.
`
`62. Section 4a(e) of the Act, 7 U.S.C. § 6a(e) (2018), makes it unlawful
`
`“for any person to violate any bylaw, rule, regulation, or resolution of any contract
`
`market, derivatives transaction execution facility, or other board of trade licensed,
`
`designated, or registered by the Commission or electronic trading facility with
`
`respect to a significant price discovery contract fixing limits on the amount of
`
`trading which may be done or positions which may be held by any person under
`
`contracts of sale of any commodity for future delivery or under options on such
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`17
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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.18 Page 18 of 24
`
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`contracts or commodities, if such bylaw, rule, regulation, or resolution has been
`
`
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`approved by the Commission or certified by a registered entity.”
`
`
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`63. CME is a registered entity under Section 1a(40)(A) of the Act, 7 U.S.C.
`
`§ 1a(40)(A) (2018), and a designated contract market for trading live cattle futures
`
`contracts and feeder cattle futures contracts pursuant to Section 5 of the Act,
`
`7 U.S.C. § 7 (2018).
`
`64. Under CME Rule 562, “[a]ny positions, including positions established
`
`intraday, in excess of those permitted under the rules of the Exchange shall be
`
`deemed position limit violations.”
`
`65. CME Rules 10202.E and 559 in effect for the October 2017 feeder
`
`cattle futures contracts imposed an initial spot month position limit of 300 contracts
`
`long or short. The CFTC approved the spot month limit.
`
`66. On or around October 13, 2017, Easterday Ranches’ intraday high
`
`position in feeder cattle futures was 329 contracts, or 29 contracts above the CME
`
`exchange-set position limit for feeder cattle.
`
`67. CME Rules 10102.E and 559 in effect for the August 2018 live cattle
`
`futures contracts imposed a single-month position limit of 6,300 contracts long or
`
`short. The CFTC approved the single-month limit.
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`18
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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.19 Page 19 of 24
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`68. On or around July 11, 2018, Easterday Ranches’ intraday high futures-
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`equivalent position in live cattle futures was 6,426.645 contracts, or 126.645
`
`
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`contracts above the CME exchange-set single-month position limit for live cattle.
`
`69. CME Rule 559 states that to obtain an exemption from position limits,
`
`a person must, inter alia, “[p]rovide a complete and accurate explanation of the
`
`underlying exposure related to the exemption request,” and “[a]gree to promptly
`
`submit a supplemental statement to the Market Regulation Department whenever
`
`there is a material change to the information provided in the most recent
`
`application.”
`
`70. As alleged in Paragraphs 15–41, Defendants submitted inaccurate,
`
`false, fictitious, or fraudulent information in connection with the 2017 Application
`
`and 2018 Application by overstating Easterday Ranches’ cattle inventory,
`
`purchases, and sales.
`
`71. By submitting materially inaccurate, false, fictitious, or fraudulent
`
`statements in connection with the 2017 Application and the 2018 Application,
`
`Defendants violated CME Rule 559.
`
`72. Because the exemptions from position limits granted by the CME in
`
`2017 and 2018 were based on inaccurate, false, fictitious, or fraudulent statements
`
`submitted by Defendants, those exemptions were not valid.
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`19
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`Case 4:21-cv-05050-SAB ECF No. 1 filed 03/31/21 PageID.20 Page 20 of 24
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`73. Because the exemptions from position limits granted by CME in 2017
`
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`and 2018 were not valid, Easterday Ranches violated CME position limits for feeder
`
`
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`cattle in 2017 and live cattle in 2018.
`
`74. Each act of exceeding CME’s position limits including, but not limited
`
`to, those specifically alleged herein, constitutes a separate violation of Section 4a(e)
`
`of the Act.
`
`75. As set forth in Paragraphs 13–41 above, Easterday controlled Easterday
`
`Ranches during the Relevant Period. Easterday failed to act in good faith and/or
`
`knowingly induced Easterday Ranches’ violations alleged herein during that time
`
`period. Easterday is therefore liable for Easterday Ranches’ violations of Section
`
`4a(e) as a controlling person pursuant to 7 U.S.C. § 13c(b).
`
` RELIEF REQUESTED
`WHEREFORE, the Commission respectfully requests that this Court, as
`
`authorized by Section 6c of the Act, 7 U.S.C. § 13a-1 (2018), and pursuant to the
`
`Court’s own equitable powers:
`
`A.
`
`Find that Defendants Cody Easterday and Easterday Ranches
`
`violated Sections 4a(e), 6(c)(1), and 9(a)(4) of the Act, 7 U.S.C. §§ 6a(e), 9(1),
`
`and 13(a)(4) (2018), and Regulation 180.1(a)(1)–(3), 17 C.F.R. § 180.1(a)(1)–(3)
`
`(2020);
`
`COMPLAINT FOR INJUNCTIVE RELIEF, CIVIL MONETARY PENALTIES, AND OTHER
`EQUITABLE RELIEF
`20
`
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