A former commodities trader who admitted to fraud in connection with a scheme to hide massive trading losses, and earn a large bonus from his firm, has been sentenced to three years in prison by a U.S. district court judge.
In 2019, the U.S. Commodity Futures Trading Commission (CFTC) alleged that, in 2015 and 2016, David Smothermon defrauded the firm Trammo Inc., where he was president and head natural gas trader, by falsely inflating the value of his trading book to conceal mounting trading losses.
Earlier this year, he pled guilty to one count of wire fraud in connection with mismarking his trading positions, which allegedly hid US$240 million in trading losses — and, led to the firm paying him a US$15-million bonus.
According to court filings, after the scheme was uncovered, the firm was forced to realize large losses, which resulted in the company downsizing and laying off hundreds of employees.
Now, Smothermon has been sentenced to three years in prison by a judge in the Southern District of New York, followed by three years of supervised release, and ordered to pay US$19.6 million in restitution and to forfeit US$11.6 million.
As a condition of his plea agreement, Smothermon paid US$8 million in restitution immediately, and he’s since paid another US$300,000 prior to sentencing.
The CFTC’s case was stayed, pending the outcome of the criminal case.