## Facts

- A federal grand jury indicted Thompson B. Sanders and three co-defendants for conspiracy, wire fraud, and four counts of false representation under the Commodity Exchange Act (CEA) arising from trading on the Chicago Board of Trade (CBT).
- CBT floor access was restricted to authorized members and personnel; trades were recorded on cards/order tickets identifying trade details and counterparties.
- The indictment alleged Sanders and a co-defendant stole or created counterfeit CBT trading jackets and identification credentials.
- Two co-defendants allegedly used the counterfeit credentials, along with disguises, to enter the restricted trading area while posing as legitimate CBT members.
- On the trading floor, one co-defendant allegedly executed Treasury bond futures trades with floor brokers, generating trading cards that were transferred to Sanders.
- The alleged scheme allowed defendants to engage in “risk-free” trading: they would claim profitable trades through accounts they controlled and decline to claim losing trades, shifting losses to others.
- Sanders moved to dismiss, arguing the charged CEA antifraud provisions did not cover fraud directed at traders and brokers (as opposed to public customers) and that the indictment failed to state an offense.

## Issues

1. Whether the CEA antifraud and false-representation provisions charged apply only to frauds against “public” customers, or also to frauds harming traders, brokers, and exchange participants.
2. Whether the indictment’s allegations, taken as true, sufficiently stated offenses under the CEA counts and wire fraud.
3. Whether a scheme using counterfeit exchange credentials and false identities to selectively claim profitable trades falls within the scope of the charged CEA prohibitions.

## Decision

- The court denied Sanders’s motion to dismiss the indictment.
- The court held the relevant CEA antifraud provisions are not limited to frauds against public customers and may reach frauds directed at traders and brokers and schemes that corrupt exchange trading and clearing.
- The court concluded the indictment adequately alleged a fraudulent scheme, including misrepresentations of identity and authority to trade and deceptive use of the trade recording/clearing process.
- The court found the indictment sufficiently apprised Sanders of the charges and alleged statutory offenses; disputes about proof were for trial, not a motion to dismiss.

## Legal Principles

- CEA antifraud and false-representation prohibitions are construed broadly to protect the integrity of futures markets and can apply to schemes injuring traders, brokers, and other market participants, not only retail/public customers.
- An indictment is sufficient if it alleges the essential elements of the charged offenses and provides adequate notice; on a motion to dismiss, factual allegations are taken as true and evidentiary questions are not resolved.
- A “risk-free” trading scheme that uses false identities or counterfeit exchange credentials to claim profits while avoiding losses can constitute fraud and false representations in connection with commodity futures trading, and may also support wire-fraud charges when interstate wires are used to further the scheme.

## Conclusion

The court allowed the prosecution to proceed, holding that the CEA counts were not confined to customer-directed fraud and that the indictment’s allegations of counterfeit-credential floor access and selective trade claiming sufficiently stated CEA and wire-fraud offenses.


United States v. Sanders, 688 F. Supp. 367 (N.D. Ill. 1988)