United States District Court, N.D. Illinois, Eastern Division
U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
YUMIN LI, and KERING CAPITAL LTD. Defendants, KERING CAPITAL LTD. Relief Defendant.
OPINION AND ORDER
L. Ellis, Judge
U.S. Commodity Futures Trading Commission
(“CFTC”) filed a complaint against Defendants
Yumin Li and Kering Capital, Ltd. (“Kering”),
alleging that Li and Kering violated the Commodity Exchange
Act (“ the Act”), 7 U.S.C. §§
6b(a)(1)(A) and (C), 7 U.S.C. § 6c(a), and 17 C.F.R.
§ 1.38(a), when Li cheated or defrauded Li's
employer, Tanius Technology (“Tanius”), by
entering into pre-arranged, fictitious trades of futures
contracts designed to transfer money from Tanius to Kering.
CFTC now moves for summary judgment, seeking to permanently
enjoin Defendants from further violations of the Act,
permanently enjoin Li from trading in the futures markets,
and permanently enjoin Kering from granting Li access to its
futures trading accounts and from relying upon Li for trading
advice and direction. CFTC also asks the Court to impose a
civil monetary penalty of $901, 387.50, jointly and severally
against the Defendants. Finally, CFTC requests that the Court
order restitution to Tanius in the amount of $300, 462.50,
plus post-judgment interest.
the undisputed facts establish that Li engaged in illegal
fictitious trades in order to fraudulently transfer funds
from Tanius to Kering and did so in the scope of her
employment with Kering, the Court grants the CFTC's
motion for summary judgment. The Court orders Li and Kering
to return $300, 462.50, plus post-judgment interest, to the
Tanius Account and to pay a civil penalty of $901, 387.50.
The Court enjoins Li from working in the futures markets for
five years and permanently enjoins Li from future violations
of the Act. The Court enjoins Kering from employing Li to do
any work related to the futures markets for five years and
permanently enjoins Kering from future violations of the Act.
also moves to strike  the declaration of Nicolas Morgan
in opposition to the motion for summary judgment , the
declaration of Dr. Tiago Duarte-Silva , and Li's
Response to the Joint Statement of Undisputed Material
Facts . Li subsequently withdrew the
declaration of Dr. Duarte-Silva, but she continues to object
to the exclusion of her Response and the Morgan declaration.
Because the Response does not comply with the Court's
standing order on summary judgment procedures and the Morgan
declaration puts forth irrelevant and inadmissible evidence,
the Court grants CFTC's motion to strike.
a California based trading firm, employed Li from February
2013 until May 2015. Tanius hired Li because she had
expertise in Eurodollar and other types of trading. While
employed at Tanius, Li received a total of $931, 140.21.
According to her employment agreement, Li was not authorized
to trade any securities or financial instruments for herself
or any other entity without authorization from Tanius.
contends that while at Tanius, she was treated unfairly
relating to the margin and risk limits on her trading
activities. Li also felt that Tanius did not appropriately
compensate her and thus, she faciliated the trades described
below in order to obtain compensation which she believed
Tanius owed to her.
accepted a position as a trader at Kering in November 2014
while still employed at Tanius. At Kering, Li was the only
person trading futures for Kering and held sole
responsibility for developing Kering's futures trading
to her employment at Tanius, Li had worked periodically as a
Eurodollar trader for five years. Li has a master's
degree in statistics and a bachelor's degree in business
Kering Capital Limited
is a company incorporated in the British Virgin Islands.
Yanping Lu, Li's mother, formed Kering in November 2014.
Lu is the Chief Executive Officer of Kering. Kering's
sole business activity is trading; its only business asset is
the trading account ending in 2536 (“Kering
Account”). During the relevant timeframe, Li was a
probationary trader for Kering, but she expected to receive
compensation from Kering for profitable trading and she
expected to be hired by Kering if she generated enough
Tanius Technology LLC
is a California-based trading firm. One of Tanius'
founders, Gary Middlemiss, was Li's supervisor at Tanius.
While working at Tanius, Li had access to Middlemiss'
trading account ending in 8202 (“Tanius
Trading at Issue
on March 17, 2015 and continuing until May 6, 2015, Li used
the Tanius Account to engineer a series of trades designed to
benefit Kering. Li structured 41 trades over six separate
occasions such that the Tanius Account would always buy
futures from the Kering Account at higher prices and sell
those same futures back to Kering at lower prices (or in the
reverse order in some circumstances) completing what is known
as a “round-turn trade.” Regardless of the order
of the transaction, each transaction resulted in
unidirectional profits to Kering at the expense of Tanius.
Over the course of these 41 transactions, Li successfully
transferred $300, 462.50 from the Tanius Account to the
Kering Account. Li was not authorized by Middlemiss or anyone
else at Tanius to enter into any of these 41 transactions and
she was not authorized to enter into any transactions that
obviously would result in a loss for Tanius.
always placed these orders outside of normal trading hours in
illiquid futures markets-typically Eurodollar futures with
expiration dates more than five years in the future. She
would enter an order with one account and then, within
seconds, enter an identical order with the other account on
the opposite side of the trade. For example, on May 6, 2015,
between 12:42:54 AM and 12:43:05 AM (a nine-second window),
Li entered orders on the Kering Account selling a total of
2400 futures with three different expiration dates. Then,
between 12:44:17 AM and 12:44:21 AM, Li entered orders on the
Tanius Account to buy the exact same quantities of those
futures at the exact price she offered them on the Kering
Account. These orders matched and the exchange executed the
trade. Li then immediately closed out the position by doing
essentially the same transaction in reverse, this time
entering an order to buy the same 2400 futures with the
Kering Account and selling them from the Tanius account, but
this time at a lower price. Again the orders matched and the
exchange executed the trade. The total time elapsed from the
moment Li entered the first order until she closed out the
position was one minute and forty seconds, during which time
she transferred $67, 487.50 from the Tanius Account to the
Kering Account. Each of the other round-turn trades Li
executed between the Tanius Account and the Kering Account
resulted in a loss to Tanius and a gain to Kering.
engaging in these trades outside of regular business hours,
placing nearly simultaneous orders in illiquid products, Li
was able to virtually assure that she would not trade with a
third party, and eliminated any market risk to her
transaction. During each of her trades, the Kering Account
and Tanius Account were the only two accounts trading in the
Discovery of the Trading and Subsequent Action
6, 2015, Middlemiss noticed that trading had occurred in the
Tanius Account that had caused a significant loss on the
account. Middlemiss asked Li about the trades and she
admitted to executing the trades. That same day, Li fled to
China where she remains to this day. Li has expressed her
intention to return to the United States and continue trading
for Kering after the conclusion of this case.
did not authorize Li to engage in illegal transactions, and
Lu was not aware that Li conducted trades on behalf of Kering
by controlling the Tanius Account and directing trades
favoring Kering with that account.
Freezing of the Kering Account
2, 2015, the Court entered an order freezing the assets in
the Kering Account. The parties consented to a preliminary
injunction extending the freeze for the duration of the case
on July 23, 2015.
judgment obviates the need for a trial where there is no
genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Fed.R.Civ.P. 56. To
determine whether a genuine issue of fact exists, the Court
must pierce the pleadings and assess the proof as presented
in depositions, answers to interrogatories, admissions, and
affidavits that are part of the record. Fed.R.Civ.P. 56 &
advisory committee's notes. The party seeking summary
judgment bears the initial burden of proving that no genuine
issue of material fact exists. Celotex Corp. v.
Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d
265 (1986). In response, the non-moving party cannot rest on
mere pleadings alone but must use the evidentiary tools
listed above to identify specific material facts that
demonstrate a genuine issue for trial. Id. at 324;
Insolia v. Philip Morris Inc., 216 F.3d 596, 598
(7th Cir. 2000). Although a bare contention that an issue of
fact exists is insufficient to create a factual dispute,
Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th
Cir. 2000), the Court must construe all facts in the light
most favorable to the non-moving party and draw all
reasonable inferences in that party's favor. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct.
2505, 91 L .Ed. 2d 202 (1986).
Motion to Strike
moves to strike the declaration of Nicolas Morgan in
opposition to the motion for summary judgment, the
declaration of Dr. Tiago ...