CFTC orders Trafigura to pay $55M over fraud, impeding whistleblowers

Trafigura used material nonpublic information from an employee of a Mexican trading company its traders knew or were reckless in not knowing, the CFTC alleged in a press release Monday.

In February 2017, the company manipulated a fuel oil benchmark to benefit its futures and swaps positions and violated the Mexican employee’s duties to the trading entity where they worked, the agency added.

The details: From 2017-20, the company required to sign employment and separation agreements with nondisclosure provisions prohibiting them from disclosing company information without making exceptions for law enforcement and regulatory agencies.

The provisions “led to confusion among certain current and former Trafigura employees that had the effect of impeding their direct and voluntary communications with the commission,” the agency said in its order.

The settlement also marked the first time the CFTC took an action against an entity for violating its whistleblower protection rule.

”This groundbreaking action demonstrates the CFTC’s commitment to protecting potential whistleblowers and puts the market on notice that the CFTC will not tolerate attempts to silence potential witnesses,” said Brian Young, CFTC director of the Whistleblower Office, in the release.

In March, Trafigura paid $127 million in fines and forfeiture to regulators in the United States and Brazil to settle violations of the Foreign Corrupt Practices Act.

The Department of Justice alleged that Trafigura paid bribes to win and retain contracts with the Brazilian state-owned oil company Petrobras from 2003-14.

Compliance considerations: Trafigura took voluntary steps to remediate the compliance issues that allowed the violations to occur, the CFTC said in its order, including by “developing and implementing enhanced, risk-based policies and procedures relating to market integrity, enhancing processes and controls around communications relating to market activity, investing additional resources in employee training and compliance testing, and enhancing ongoing compliance monitoring and controls testing processes.”

Company response: In a statement released Monday, Trafigura added that it had “agreed to modify the non-disclosure provisions in its employment, termination, and severance agreements to include language making clear that nothing in those provisions should be understood to limit or prevent communications with governmental authorities about potential violations of law.”

Despite entering into the settlement, Trafigura neither admitted or denied the CFTC’s allegations.