By Wailin Wong |
A Memphis-area former trader is facing federal fraud charges for
allegedly carrying out massive rogue bets in Chicago’s wheat markets
that generated a $141 million loss to his firm, New York-based MF
Global.
A federal grand jury returned an 18-count indictment against
42-year-old Evan Brent Dooley on Tuesday, U.S. Attorney Patrick
Fitzgerald announced today in a statement. Dooley, whose residence is
in Mississippi, was charged with 16 counts of wire fraud and two counts
of violating limits on speculative positions established by the
Commodities Exchange Act.
Dooley had worked out of MF Global’s Memphis branch and his Mississippi home starting in September 2006, trading on his own account with MF Global acting as his financial guarantor. According to the indictment, Dooley planned to trade futures contracts at the Chicago Board of Trade that would exceed his ability to cover potential trading losses, “thereby intentionally shifting the risks associated with his trading activity onto MF Global.”
Federal officials said Dooley got started with MF Global by giving the company false information about his net worth. According to the indictment, he initially triggered concerns when he executed a large number of trades on wheat futures contracts during an overnight session in January 2008. When told his actions were “out of line,” Dooley allegedly said his activity was an unintentional error.
The primary alleged incident took place during the overnight session of Feb. 27, 2008, when Dooley amassed a huge short position in wheat futures contracts, meaning he was betting that prices would fall. According to the indictment, his overall position handily exceeded regulatory limits. In addition, prices rose, with Dooley caught on the wrong end of his substantial bet. When MF Global discovered Dooley’s actions the next morning and liquidated his position, the total loss came to $141 million, federal officials said. Dooley was also fired.
The incident forced MF Global executives to acknowledge a breach of its internal trading controls. Also, in December, the Commodity Futures Trading Commission fined the company $10 million and settled charges for four “significant supervision violations” between 2003 and 2008, including the Dooley incident.
