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CFTC says Kraft, Mondelez to pay $16 million in wheat price manipulation case
Source: Reuters
BUSINESS NEWS AUGUST 15, 2019 / 11:47 AM / UPDATED 2 HOURS AGO
CFTC says Kraft, Mondelez to pay $16 million in wheat price manipulation case
(Reuters) - The U.S. Commodity Futures Trading Commission (CFTC) said on Thursday Kraft Heinz Co and Mondelez International Inc will have to pay $16 million in penalty regarding a wheat manipulation case that dates back to 2015.
Kraft Heinz, which was Kraft Foods until 2015, and Mondelez bought $90 million of December 2011 wheat futures, which gave the companies a dominant position in the market, even though they never intended to take possession of the grain, the CFTC said.
The move sent a false signal that the companies had demand for wheat and caused an artificial price fluctuation that earned them more than $5 million in profits, the CFTC said.
Both companies said they strongly disagree with CFTC’s statement, which “blatantly violate and misrepresent the terms and spirit of the consent order”, and will be seeking immediate relief from the court.
-snip-
CFTC says Kraft, Mondelez to pay $16 million in wheat price manipulation case
(Reuters) - The U.S. Commodity Futures Trading Commission (CFTC) said on Thursday Kraft Heinz Co and Mondelez International Inc will have to pay $16 million in penalty regarding a wheat manipulation case that dates back to 2015.
Kraft Heinz, which was Kraft Foods until 2015, and Mondelez bought $90 million of December 2011 wheat futures, which gave the companies a dominant position in the market, even though they never intended to take possession of the grain, the CFTC said.
The move sent a false signal that the companies had demand for wheat and caused an artificial price fluctuation that earned them more than $5 million in profits, the CFTC said.
Both companies said they strongly disagree with CFTC’s statement, which “blatantly violate and misrepresent the terms and spirit of the consent order”, and will be seeking immediate relief from the court.
-snip-
Read more: https://www.reuters.com/article/us-kraft-heinz-cftc/cftc-says-kraft-mondelez-to-pay-16-million-in-wheat-price-manipulation-case-idUSKCN1V51TU
______________________________________________________________________
Source: U.S. Commodity Futures Trading Commision
RELEASE Number
7996-19
August 15, 2019
Kraft and Mondelēz Global to Pay $16 Million in Wheat Manipulation Case
Penalty Valued at Three Times the Alleged Gain
Washington, DC — The U.S. Commodity Futures Trading Commission today announced that it obtained a $16 million penalty and injunction pursuant to a federal court’s entry of a consent order against defendants Kraft Foods Group, Inc. and Mondelēz Global LLC. The order, entered on August 14, 2019 by the Honorable Judge John Robert Blakey of the U.S. District Court for the Northern District of Illinois, resolves the CFTC’s complaint alleging, among other things, manipulation of the wheat market.
The $16 million penalty is approximately three times defendants’ alleged gain. The order also enjoins Kraft and Mondelēz from engaging in future violations of the manipulation, wash trade, and position limit provisions of the Commodity Exchange Act and CFTC regulations charged in the complaint.
“America is the breadbasket of the world; wheat markets are its heart. Market manipulation inflicts real pain on farmers by denying them the fair value of their hard work and crops,” said Chairman Heath P. Tarbert. “It also hurts American families by raising the costs of putting food on the table. Instances of market manipulation are precisely the kinds of cases the CFTC was founded to pursue.”
The CFTC complaint alleged that in response to high cash wheat prices in late summer 2011, Kraft and Mondelēz developed, approved, and executed a manipulative strategy to purchase and stand for delivery on more than 3,000 futures contracts (approximately $90 million) of Soft Red Winter (SRW) Wheat in the December 2011 expiration to send the market a false signal that the defendants had demand for — and would use — futures wheat to source the defendants’ wheat supply requirements in their Toledo mill. (Release No. 7150-15) The complaint alleged that, in fact, Kraft and Mondelēz had no intention of sourcing wheat from the futures market, and the $90 million of wheat futures at issue far exceeded their actual sourcing needs. As alleged, Kraft’s and Mondelēz’s true goal was to narrow the price spread between the December 2011 and deferred-month wheat futures contracts, thereby causing the market to sell cash wheat to Kraft and Mondelēz at lower prices, while earning Kraft and Mondelēz a profit on their speculative futures positions. The complaint further alleged that Kraft’s and Mondelēz’s actions caused an artificial price that ultimately earned them more than $5 million in profits.
-snip-
7996-19
August 15, 2019
Kraft and Mondelēz Global to Pay $16 Million in Wheat Manipulation Case
Penalty Valued at Three Times the Alleged Gain
Washington, DC — The U.S. Commodity Futures Trading Commission today announced that it obtained a $16 million penalty and injunction pursuant to a federal court’s entry of a consent order against defendants Kraft Foods Group, Inc. and Mondelēz Global LLC. The order, entered on August 14, 2019 by the Honorable Judge John Robert Blakey of the U.S. District Court for the Northern District of Illinois, resolves the CFTC’s complaint alleging, among other things, manipulation of the wheat market.
The $16 million penalty is approximately three times defendants’ alleged gain. The order also enjoins Kraft and Mondelēz from engaging in future violations of the manipulation, wash trade, and position limit provisions of the Commodity Exchange Act and CFTC regulations charged in the complaint.
“America is the breadbasket of the world; wheat markets are its heart. Market manipulation inflicts real pain on farmers by denying them the fair value of their hard work and crops,” said Chairman Heath P. Tarbert. “It also hurts American families by raising the costs of putting food on the table. Instances of market manipulation are precisely the kinds of cases the CFTC was founded to pursue.”
The CFTC complaint alleged that in response to high cash wheat prices in late summer 2011, Kraft and Mondelēz developed, approved, and executed a manipulative strategy to purchase and stand for delivery on more than 3,000 futures contracts (approximately $90 million) of Soft Red Winter (SRW) Wheat in the December 2011 expiration to send the market a false signal that the defendants had demand for — and would use — futures wheat to source the defendants’ wheat supply requirements in their Toledo mill. (Release No. 7150-15) The complaint alleged that, in fact, Kraft and Mondelēz had no intention of sourcing wheat from the futures market, and the $90 million of wheat futures at issue far exceeded their actual sourcing needs. As alleged, Kraft’s and Mondelēz’s true goal was to narrow the price spread between the December 2011 and deferred-month wheat futures contracts, thereby causing the market to sell cash wheat to Kraft and Mondelēz at lower prices, while earning Kraft and Mondelēz a profit on their speculative futures positions. The complaint further alleged that Kraft’s and Mondelēz’s actions caused an artificial price that ultimately earned them more than $5 million in profits.
-snip-
Read more: https://www.cftc.gov/PressRoom/PressReleases/7996-19