CFTC Secures Consent Order and $90,000 Penalty Against Swaps Trader for False Statements During Investigation

The Commodity Futures Trading Commission announced that the U.S. District Court for the Southern District of New York entered a consent order against John Patrick Gorman III, a U.S. dollar swaps trader and managing director of a global investment bank.

The order finds Gorman made false or misleading statements of material fact to the Commission during its investigation that he knew, or reasonably should have known, to be false or misleading. The order requires Gorman to pay a $90,000 civil monetary penalty.

“Attempts to impede or obstruct the Commission’s investigations go to the very heart of the division’s ability to detect wrongdoing and enforce the law,” said Director of Enforcement David I. Miller. “As today’s resolution shows, we have zero tolerance for false statements made to staff during the course of an investigation.”

Details of the Obstruction

In March 2019, Division of Enforcement staff sent Gorman a preservation request for documents relating to an investigation into certain trading by him and his employer. After Gorman became aware of the preservation request, Gorman deleted messages, including WhatsApp messages, which were covered by the request.

The division also sent a subpoena seeking certain categories of documents, including WhatsApp messages. When Gorman’s personal phone was imaged in response to the subpoena, numerous responsive WhatsApp messages were no longer on his phone. The order finds Gorman deleted a single message from a text conversation with a colleague, which was relevant and material to the investigation.

In May 2019, Gorman submitted a letter to the division falsely stating he had not destroyed or altered any documents covered by the preservation request. He also made additional false and misleading statements during his CFTC testimony in November 2019 about his compliance with the preservation request and his communications with bank employees who were not on the swaps desk. Gorman knew or reasonably should have known at the time that his statements were false or misleading.

Terms of the Consent Order

The consent order resolves the CFTC’s enforcement action against Gorman and permanently enjoins him from violating the provision of the Commodity Exchange Act, as charged. The order also dismisses with prejudice counts I and II of the CFTC complaint filed against Gorman on Feb. 1, 2021.

This action as announced by the CFTC demonstrates the direct consequences for impeding an active investigation.

Reporting: CFTC Enforcement Actions

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