Grain Contracts Probe Leads to Charges

In its first enforcement actions involving so-called hedge-to-arrive contracts, the Commodities Futures Trading Commission filed a complaint against Roger Wright of Mechanicsburg, Ohio, accusing him of fraud in the promotion and marketing of illegal off-exchange futures and options contracts and failure to register as a commodity trading advisor. The CFTC in February began an inquiry into whether some grain contracts are illegal because they aren’t traded on a regulated exchange, and whether there was fraud in the sale of such contracts. Investigators also looked into whether some people dealing in such contracts should have been registered with the CFTC because they played the role of a commodity trading advisor. The CFTC complaint also accuses Buckeye Countrymark Inc. of Xenia, Ohio, of offering illegal off-exchange futures and options contracts. As part of the complaint, St. Louis-based brokerage A.G. Edwards & Co. and its employee Philip Luxenburger are charged with “aiding and abetting” Wright’s failure to register as a trading advisor. A separate complaint accuses Southern Thumb Co-Op Inc., a cooperative grain elevator in LaPeer, Mich., of violating the ban on sales of illegal off-exchange agricultural options and of fraud related to the sales of options. A third complaint charges Grain Land Cooperative of Blue Earth, Minn., of offering and entering into illegal off-exchange futures contracts. Neither the individuals charged nor their attorneys were available for comment. An Edwards executive said there would be no immediate comment.