“It’s an open secret among my brethren that if you get Levine, he’s not going to rule for the investor.”

-Steven Berk, an investor protection attorney in Washington


Michael Hiltzik of the Los Angeles Times takes Judge Painter‘s CFTC accusation against his fellow judge Bruce Levine to a new level:

“It would be hard for the commission to claim it has been unaware of serious issues with Levine’s work. My search found three cases in which it overturned dismissals by Levine, sometimes with harsh words for his performance.

In 2007, for instance, the CFTC concluded that Levine committed “procedural errors” and “severely prejudiced” an investor in his $74,000 complaint against a futures broker. The commission awarded the investor more than $32,000.

In another case, the commission overruled Levine’s dismissal of an investor’s complaint twice before finally transferring the matter to Painter. He awarded the investor, a 75-year-old retiree, $47,627.

In a third case, the CFTC bounced a dismissal back to Levine with instructions to waive the procedural rule that prompted his dismissal. Levine dismissed it again, throwing in for good measure harsh words about the commission’s performance.”

In light of Judge George Painter’s contention of Levine’s vow to never to rule in an investor’s favor appears to be borne out by the record.

Indeed, as Hiltzik states, “When George H. Painter says the game is rigged against the small investor in Washington, I have reason to take him at his word.

And Hiltzik expands:

“I first encountered Judge Painter nearly three decades ago, when he issued a number of stern rulings involving a Newport Beach investment operator I had been writing about.

The investment firm, Monex International, had been hawking illegal futures contracts, he ruled. In one case, he found that Monex had ignored a customer’s repeated pleas to cash out her deteriorating stake, and awarded her $20,000 in reparations.

When I reached Painter again last week, he didn’t seemed to have changed much. “It’s gone to hell,” he said, referring to the standing of the investor at the CFTC. “But it’s always been that way, hasn’t it? We’re not prosecuting the bad guys.” For the record: He sounded perfectly lucid . . .

Under normal circumstances, Painter’s view might be taken to heart by the bureaucratic establishment in Washington. It was regulatory agencies’ failures to look out for consumers that helped win enactment of a new consumer protection agency this year.”

The CFTC, which regulates the commodity futures markets, has very much been captured by the group it is charged with regulating. If you are an investor in commodities, you should expect rape and pillage as part of the “servicing” you get from the industry and its regulators.

I never thought I would say this, but the CFTC makes the absurd arbitration process for equities look almost fair by comparison.

Bottom line: Speculate in Futures with risk capital only, and assume that 1) you will lose most if not all of your monies; b) if you are wronged, you should not have any expectations of obtaining Justice through the CFTC judicial process.


Retiring CFTC judge’s allegations should concern small investors
Michael Hiltzik
Los Angeles Times, October 26, 2010

Category: Commodities, Legal, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “CFTC Judge Allegations Should Concern Investors”

  1. constantnormal says:

    I’m shocked, SHOCKED to find bias and favoritism toward large corporations within a regulatory agency of the Bananamerican goobermint …

    Seriously, the one thing that would REALLY shock me would be if some sort of corrective action were taken to make the CFTC an actual regulatory agency again, instead of a wing of the Chamber of Commerce …

  2. wunsacon says:

    We’ve been ratted out here, boys. Watch yourselves.
    - Jack Napier’s advice to small investors

  3. Lyle says:

    Actually the Bottom Line made it clearly all commodities are speculations, most speculators at the end of the day get taken to the cleaners as the commodities casino’s house gets all the money. (That is the whole point of a casino to make money for the house). All of Wall Street is a casino, and its only reason for existance is to make money for the house.

  4. Jeff Malec says:

    Being part of the commodities industry via its more polished managed futures arm – I have to take offense to your comment:

    …if you are an investor in commodities, you should expect rape and pillage as part of the “servicing” you get from the industry and its regulators…

    There are indeed bad apples in the commodities industry which do things they shouldn’t, which result in claims by clients, which as you have highlighted may have ended up in front of a corrupt judge. But the grand majority of the industry, especially those involved in managing the ~$225 Billion invested through managed futures, is comprised of those who do things the right way, in the interest of the client.

    Should clients of FusionIQ expect rape and pillage because you are in the same industry (with same regulators) as Bernie Madoff was?

  5. much to cn’s point, above..

    w/: “..The CFTC, which regulates the commodity futures markets, has very much been captured by the group it is charged with regulating. If you are an investor in commodities, you should expect rape and pillage as part of the “servicing” you get from the industry and its regulators..”-from the Post

    We’d be, indeed, fortunate if it was only the CFTC that had been so ‘compromised’..

  6. MJ1 says:

    Umm, having been a commodities regulator, I have to say that the industry is not generally very consumer protection oriented, despite what Jeff may believe. There is a pervasive “wild west” and “monte carlo” attitude among people I dealt with, both at small and large houses and institutions.

    There are good people in the enforcement division of the CFTC, but the agency has been so defanged and its leadership so anti-enforcement that it would require a major overhaul to even begin fixing the problem. The law would have to be revised to make it reasonably possible to prove manipulation, which is almost impossible to prove today. ALJs would have to be replaced with more … open ALJs.

    And the industry would have to accept a more activist CFTC and a much stronger ethical norm.

    Good luck on all these counts.

  7. Bernie X says:

    So during the flash crash, did futures trades get arbitrarily cancelled ?

    The CFTC requires every futures client to acknowledge in the client disclosure that he/she is speculating, NOT investing, and will most likely lose all their money.

    The stock industry creates a huge deception to the client that they are “investing”, when in fact they are speculating.

    So when speculating in stocks, why not use the industry that offers better, more reliable, and more transparent execution, and better leverage, and doesn’t lie to their clients about risk.

  8. MJ1 says:

    Bernie, your position puzzles me. It is “why not give us money because we tell you that you are going to lose it all in the fine print?” The way one gets clients is to sell the idea that “we do it better, we can reduce your risk, we can make you money” and then get folks to sign the “risk” disclosures. It’s like “the other guys will lose money and we are required to tell you about that, but we will take care of you.”

    Yes, the securities industry has gotten worse — and many of these companies should be whacked by the SEC and their executives in orange suits — but most people who put money in securities accounts and leave them in broadly diversified accounts over time will make reasonable returns. Most people who try beating the commodities markets who don’t do it for a living lose and lose everything quickly.

    That doesn’t mean some people should not put some money in commodities — sometimes it is a reasonable investment. But it is very risky, very subject to abuse and we need a strong regulator, not a lapdog or detoothed and hogtied mongoose.

  9. VennData says:

    I wonder if Judge Levine could help me stay in my foreclosed home.

  10. Bernie X says:

    @ MJ1

    “…sometimes it is a reasonable investment.”
    NO NO NO !! ANY commodity trade is NEVER an investment, it’s ALWAYS speculation,a gamble. See, there’s the problem, the entire stock industry doesn’t know the difference between investing and speculating.

    “Most people who try beating the commodities markets who don’t do it for a living lose and lose everything quickly.”
    And the same for those who try to beat the stock market, but it’s rare to hear the same warnings from stock brokers about stocks that you hear about commodities.

    “…most people who put money in securities accounts and leave them in broadly diversified accounts over time will make reasonable returns.”
    It would be nice if that was the emphasis that the stock industry gave to clients, but it’s not. The stock industry makes a concerted effort to get clients to TRADE, to speculate, all the while deceiving them by telling them they’re “investing”.
    And the “reasonable returns” claim only applies to those who invested in the mid ’80s to late ’90s. Everyone who invested in the ’60s, ’70s, and after 1997 LOST to inflation for at least 10 years.

  11. MikeG says:

    One of Born’s predecessors as CFTC chair was Wendy Gramm, wife of former Sen. Phil Gramm (R-Texas), who pushed through key financial deregulatory legislation while he was senator.

    After leaving the CFTC, Wendy Gramm joined the Enron board. She was still there when the company went under. The CFTC chair to whom Judge Levine supposedly made his pledge, according to Painter, was Wendy Gramm.

    Bruce Levine made a vow nearly 20 years ago, to CFTC chair Wendy Gramm, never to rule in a complainant’s — that is, an investor’s — favor.” A review of his rulings,” Painter stated, “will confirm that he has fulfilled his vow.”

    Phil and Wendy Gramm, the crony-capitalists whose gifts to the American economy just keep on giving. Thanks again, Republicans.

  12. philipat says:

    Corrupt Judges are another nail in the coffin of the Rule of Law.

  13. oracle3 says:

    Been in the futures biz for 20 years and I will nearly guarantee you that the “investor” has nearly zero chance with the CFTC or the Industry dominated watchdog, the NFA. The pressures within every firm to generate commissions (over trade) or hit the highway are immense. You must do all your own trading (setting stops etc.) knowing that stops mean absolutely nothing if a “fast market” is declared by an exchange, a weekly occurrence. Only trade commodities through stock in a commodities company (Carghill (grains), Barrick Gold, and known meat processing firms. Managed Futures carry with them huge commissions based on a percent of the profits OR a management fee. Go to Vegas or a cat house in Singapore if you want legit action.