Matt Levine, Columnist

Commodity Trader Didn't Really Believe in Market Prices

I enjoyed this Commodity Futures Trading Commission action from last week against a trader named John Aaron Brooks, who "exceeded internal trade limits on cattle futures" and was told to unwind all his positions and go sit in the corner and think about what he'd done.Â

September 30, 2013 at 9:16 PM UTC

By Matt Levine

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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I enjoyed this Commodity Futures Trading Commission action from last week against a trader named John Aaron Brooks. Brooks traded commodities for an unnamed bank* until October 2011, when he "exceeded internal trade limits on cattle futures" and was told to unwind all his positions and go sit in the corner and think about what he'd done. He unwound almost everything, but politely declined to unwind his ethanol futures positions, because he happened to have been fraudulently mismarking those for about a year and "liquidation would expose the losses that Brooks was offsetting and masking." You can imagine how that conversation went.**

The bank fired him and discovered that it was out of pocket to the tune of $42.4 million because of the hidden losses. So it turned him over to the CFTC, which is suing to get the money back and ban him from the industry and do all the good stuff you do to rogue traders.