## Facts

- The Commodity Futures Trading Commission (CFTC) brought an enforcement action alleging that Eric Moncada executed fictitious sales and non-competitive transactions in CBOT wheat futures, violating Commodity Exchange Act (CEA) § 4c(a) and CFTC Regulation 1.38.
- Moncada traded CBOT #2 Soft Red Winter Wheat futures through two proprietary trading accounts he controlled: one associated with Serdika and one associated with BES.
- On four days in October 2009 (Oct. 6, 12, 15, and 29), Moncada entered paired buy and sell orders in the same contract month at identical or near-identical prices within seconds of each other, intending that the orders match and offset between his two accounts.
- Oct. 6: a Serdika buy for 80 lots at 466 cents was followed about 1.5 seconds later by a BES sell for the same quantity and price; most lots offset between the two accounts, with some filled by third parties.
- Oct. 12: a BES sell for 116 lots at 483.5 cents was followed about 1.6 seconds later by a Serdika buy at the same quantity and price; most lots offset between accounts.
- Oct. 15: a BES buy for 271 lots at 499 cents was followed about 0.7 seconds later by a Serdika sell at the same quantity and price; most lots offset between accounts.
- Oct. 29: a Serdika sell for 154 lots at 508 cents was followed about 17.3 seconds later by a BES buy for 154 lots at 508.25 cents; the BES buy was filled by the Serdika sell.
- Moncada argued the trades were intended to close positions and were not fictitious because some portions executed against other market participants.

## Issues

1. Whether Moncada’s paired, near-simultaneous offsetting wheat futures orders between accounts he controlled, placed with the intent to match, constituted “fictitious sales” (wash trades) prohibited by CEA § 4c(a).
2. Whether the same transactions were non-competitive trades prohibited by CFTC Regulation 1.38’s requirement that futures transactions be executed openly and competitively.

## Decision

- The court granted the CFTC’s motion for summary judgment on the fictitious sales/non-competitive transactions claim.
- The court held that placing offsetting orders at identical or near-identical prices so close in time eliminated market risk and qualified as fictitious sales.
- The court rejected Moncada’s argument that partial fills by third parties prevented liability, concluding intent and structure controlled.
- The court concluded the self-matching design also rendered the trades non-competitive under Regulation 1.38.

## Legal Principles

- A “fictitious sale” under CEA § 4c(a) includes wash-type trading where a trader effectively places himself on both sides of the transaction, negating market risk and producing no meaningful change in beneficial ownership.
- Intent that buy and sell orders offset is central; closely timed, same-contract, same- or near-same-price paired orders between controlled accounts support an inference of wash-trade intent as a matter of law when undisputed.
- Partial execution against third parties does not defeat a fictitious-sale finding when the transaction structure is designed to self-match and neutralize exposure.
- CFTC Regulation 1.38 prohibits pre-arranged, non-competitive execution; transactions structured to internally match between accounts controlled by the same trader are not “open and competitive,” even if routed through an exchange’s matching process.
- A purpose of closing positions does not authorize using fictitious or non-competitive self-matching techniques.

## Conclusion

The court held that Moncada’s undisputed pattern of near-simultaneous, offsetting wheat futures orders between accounts he controlled—entered with the intent to match and at identical or near-identical prices—eliminated market risk and therefore constituted fictitious, non-competitive trading in violation of CEA § 4c(a) and CFTC Regulation 1.38.


U.S. Commodity Futures Trading Comm’n v. Moncada, 31 F. Supp. 3d 614 (S.D.N.Y. 2014)