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Nymex Penalizes Oil, Gas Traders for Fraudulent Activities

The New York Mercantile Exchange (Nymex) has taken disciplinary action against and penalized two exchange members and one non-member for fraudulent trading of natural gas and oil futures.

Frank Gaillard, a former floor clerk, was ordered to pay a fine of $100,000 to the exchange, and restitution in the amount of $48,150. He also was barred for five years (effective Monday) from applying for membership at any CME Group Inc. exchange, which includes Nymex; accessing any trading floor operated by any CME Group exchange; and directly or indirectly accessing any electronic trading or clearing platform owned or operated by the CME Group.

According to the notice of disciplinary action, Gaillard, was alleged to have on six separate occasions, intentionally engaged in a scheme to cherry-pick natural gas futures trades intended for his broker's customers and place them in the account of another trader.

At a hearing in April, the Nymex Business Conduct Committee entered an order finding that Gaillard failed to answer the charges against him.

Joseph Catalano, a Nymex member, was charged with allocating unprofitable natural gas futures trades into the accounts of three Nymex brokers without their authorization or knowledge, resulting in a loss of $8,220 to their accounts. The activity occurred between January 2009 and September 2009, according to Nymex.

Catalano was ordered to pay a fine of $75,000; pay restitution in the amount of $8,220; and will be permanently banned from applying for membership at any of the CME Group exchanges; direct or indirect access to any trading or clearing platform owned or controlled by CME Group; and access to any trading floor owned or operated by any CME Group exchange.

William Glass, a non-member of Nymex, was charged with fraudulently hiding crude oil trades from his futures commission merchant (FCM) that resulted in the loss of approximately $1.6 million to the FCM, which Glass never repaid, and the end of the FCM's business operations.

In accordance with Nymex rules on actions against non-members, Glass was permanently barred from applying for membership at any CME Group exchange; indirect or direct access to any trading or clearing platform owned or controlled by the CME Group Inc.; and access to any trading floor owned or operated by any CME Group exchange.

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