US will punish fraud and insider trading, derivatives regulator tells Congress

By Douglas Gillison

WASHINGTON, April 16 (Reuters) – Washington’s top derivatives regulator on Thursday sought to reassure lawmakers the U.S. will punish fraud as concern mounts on Capitol Hill that oil, stock and prediction market players are illicitly trading on inside information from the White House.

The first congressional testimony by the current chair of the U.S. Commodity Futures Trading Commission, Michael Selig, comes a day after media reports that his agency is investigating a series of oil futures trades executed shortly before major policy shifts by President Donald Trump.

The remarks are also a nod to the sudden spotlight in which the comparatively low-profile agency – which currently only has one sitting member, Selig, rather than its normal five – now finds itself.

In prepared remarks for the House Agriculture Committee, Selig warned anyone engaged in fraud, manipulation or insider trading: “We will find you and you will face the full force of the law.”

While not commenting on any specific case, Selig also said on Thursday his agency was pursuing an unspecified number of investigations.

“I can’t speak to the specific number, but of course, we’re always receiving tips and always responding and making sure that we’re protecting our markets,” he said.

Reuters reported earlier this month that traders placed a large, unusual $950 million bet on the oil price falling just hours ahead of a U.S.-Iran ceasefire.

Under questioning from the committee’s top Democrat, Angie Craig, Selig said the CFTC would not wait to issue new regulations until the remaining four members of the five-member commission are confirmed. 

“We cannot, for the sake of the American people, slow down in our rulemaking,” he said.

A Reuters review of trading ahead of major Trump ​administration decisions on tariffs, Venezuela and Iran that led to significant market moves showed at least four instances where legal experts said it appeared investors knew what would happen shortly before it did. Many of these trades fall within the CFTC’s jurisdiction.

Selig declined to be drawn out when Democrat Jim McGovern asked him whether the White House had attempted to interfere in CFTC investigations.

“I’m not going to play speculation games with you, but I will tell you that we have a zero tolerance policy when it comes to fraud, manipulation and insider trading,” Selig said.

The White House has denied any involvement in alleged insider trades.

With a current budget of less than $400 million, the CFTC, created in 1974, is charged with policing an expanding and increasingly complex set of markets for futures, swaps and event contracts, and it is poised to take on a central role in overseeing trade in digital assets.

(Reporting by Douglas Gillison in Washington; editing by David Gaffen, Hugh Lawson and Chris Reese)