Commodity Futures Trading Commission v. Easterday et al

On March 31, 2021, Commodity Futures Trading Commission (“Commission” or “CFTC”), represented by Allison Voticky Passman, Ashley J. Burden and Benjamin E. Sedrish, attorneys at U.S. Commodity Futures Trading Commission, filed a civil enforcement action against Cody Easterday and Easterday Ranches, Inc. (collectively, “Defendants”) seeking injunctive relief, civil monetary penalties, and restitution among other reliefs for allegedly defrauding his business partner. This case was filed in the U.S. District Courts for the Eastern District of Washington with Judge Stanley A. Bastian presiding.

In its complaint, CFTC alleged that “For more than 10 years, Defendant Cody Easterday accumulated staggering losses speculatively trading in the cattle futures markets, ultimately amassing more than $200 million in losses in his personal and corporate accounts. To meet margin calls, Easterday concocted a scheme to defraud one of his biggest business partners. Beginning in or before October 1, 2016, and continuing to at least December 1, 2020, (“Relevant Period”), Defendants Easterday Ranches, Inc. (“Easterday Ranches”) and Cody Easterday operated a scheme to defraud a producer of beef and pork products (“Producer”) out of more than $233 million by submitting to the Producer fabricated invoices for reimbursement for cattle that Easterday Ranches had agreed to purchase and care for on behalf of the Producer.”

CFTC further alleged that “In or around November 2020, Cody Easterday admitted to a Producer representative that he had caused Easterday Ranches to submit invoices to the Producer for cattle that never existed, and that he did so to generate money to cover millions of dollars of losses he and Easterday Ranches incurred while engaging in speculative trading in the cattle and corn futures markets. In furtherance of the fraud, in at least 2017 and 2018, Easterday caused Easterday Ranches to submit false cattle inventory, purchase, and sales figures to the Chicago Mercantile Exchange (“CME”) in two hedge exemption applications to seek permission to exceed the exchange’s speculative position limits and avoid disciplinary action.”

CFTC further alleged that “Because Easterday Ranches was not entitled to any hedge exemptions as a result of the false information in its hedge exemption applications, Defendants violated CME’s position limits in 2017 and 2018. Easterday also admitted to the fraud and false statements to the CME to the Department of Justice in or about March 2021.”

There are three claims for relief laid down by the CFTC. The first claim is for alleged violations of Section 6(c)(1) of the Act, 7 U.S.C. § 9(1) (2018), and Regulation 180.1(a)(1)–(3), 17 C.F.R. § 180.1(a)(1)–(3) (2020). The second claim is for alleged violations of Section 9(a)(4) of the Act, 7 U.S.C. § 13(a)(4) (2018) False Statements to a Registered Entity. The last claim is for alleged violations of Section 4a(e) of the Act, 7 U.S.C. § 6a(e) (2018) Exceeding CME Position Limits for Live and Feeder Cattle Futures Contracts.

In its prayer for relief, the CFTC has requested the court to adjuge that Defendants have violated the alleged laws, and grant permanent injunction against Defendants prohibiting future violations. CFTC further requested the court to stop Defendants from entering into any transactions involving commodity interests, trading and having any commodity interests, order disgorgement of all obtained gains, order full restitution, and direct Defendants to pay a civil monetary penalty along with costs of this action.

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