The
National Futures Association has filed a complaint against NinjaTrader Clearing
and its president Michael Cavanaugh, alleging significant failures in
anti-money laundering (AML) controls and suspicious activity monitoring at the
Chicago-based futures commission merchant.
NFA Files Complaint
Against NinjaTrader over AML Violations, Prison-Linked Trading
The
regulatory action targets NinjaTrader’s handling of multiple suspicious
accounts, including one linked to an imprisoned individual and another
involving potential unregistered trading operations. NFA states, “These telephone communications with Individual 2 appear to have
occurred while he was in prison.”
The firm,
which manages approximately 85,000 accounts and maintains over $22 million in
excess net capital, allegedly failed to properly investigate numerous red flags
despite its rapid growth following several acquisitions.
“During the
2023 exam, NFA reviewed a sample of five alerts on the Daily Red Flag report
generated on February 13, 2023 and found the firm failed to conduct enhanced due diligence with respect to two accounts on the report, despite
unusual activity involving them,” the regulator commented.
NinjaTrader
Clearing is a subsidiary of NinjaTrader Group, the company behind a popular
retail trading platform specializing in futures markets. Cavanaugh has served
as its President for nearly four years. Two months ago, the company also appointed
the former Charles Schwab Director as another C-level executive.
Key NFA’s Allegations
In one
notable case, NinjaTrader allegedly failed to properly investigate an account
belonging to a 20-year-old who reported income and net worth below $50,000 but
managed to deposit $82,000 within months of opening the account.
The account
was connected to an individual serving prison time for money laundering, who
was recorded placing trades despite explicit instructions prohibiting his
involvement.
The
complaint highlights systematic deficiencies in NinjaTrader’s compliance
infrastructure, including:
- Failure to
aggregate deposits across multiple accounts for monitoring purposes - Inadequate
review of suspicious activity alerts - Insufficient
investigation of accounts exceeding deposit thresholds - Failure to
screen nearly 61,000 accounts against FinCEN’s watchlist
Historical Context
This isn’t
the first time the firm has faced regulatory scrutiny. Prior to its acquisition
by NinjaTrader Group LLC in
December 2020, the company’s predecessor, York Business Associates LLC
(doing business as TransAct) was sanctioned by both the CFTC and NFA for
similar supervisory failures. The incident occurred 12 years ago, and the CFTC
imposed a fine of just under $200,000 on the company.
„Specifically,
the CFTC order finds that from about October 2007 to at least February 2008,
TransAct’s employees failed to follow-up sufficiently on “red flags” concerning
suspicious activity,” CFTC commented in 2012.
More than a
decade later, the CFTC has again imposed a penalty on NinjaTrader, citing
alleged mishandling of fraudulent accounts. As part of the settlement,
NinjaTrader Clearing agreed
to pay a $750,000 civil penalty and $233,425 in restitution to fraud
victims.
.@CFTC Orders Illinois Futures Commission Merchant to Pay More Than $980,000 for Supervision Failures: https://t.co/GV2brdqBOW
— CFTC (@CFTC) September 23, 2024
The CFTC
reported that the Illinois-based futures commission merchant failed to exercise
due diligence in supervising employee actions related to managing suspected
fraudulent accounts. Despite a statutory restraining order requiring immediate
freezing or restriction of these accounts, the firm reportedly failed to act
promptly, leading to further regulatory action.
According
to the NFA, NinjaTrader added over $192 million in customer funds between
August 2021 and May 2022, primarily through acquisitions and bulk transfers
from other firms.
The
National Futures Association has filed a complaint against NinjaTrader Clearing
and its president Michael Cavanaugh, alleging significant failures in
anti-money laundering (AML) controls and suspicious activity monitoring at the
Chicago-based futures commission merchant.
NFA Files Complaint
Against NinjaTrader over AML Violations, Prison-Linked Trading
The
regulatory action targets NinjaTrader’s handling of multiple suspicious
accounts, including one linked to an imprisoned individual and another
involving potential unregistered trading operations. NFA states, “These telephone communications with Individual 2 appear to have
occurred while he was in prison.”
The firm,
which manages approximately 85,000 accounts and maintains over $22 million in
excess net capital, allegedly failed to properly investigate numerous red flags
despite its rapid growth following several acquisitions.
“During the
2023 exam, NFA reviewed a sample of five alerts on the Daily Red Flag report
generated on February 13, 2023 and found the firm failed to conduct enhanced due diligence with respect to two accounts on the report, despite
unusual activity involving them,” the regulator commented.
NinjaTrader
Clearing is a subsidiary of NinjaTrader Group, the company behind a popular
retail trading platform specializing in futures markets. Cavanaugh has served
as its President for nearly four years. Two months ago, the company also appointed
the former Charles Schwab Director as another C-level executive.
Key NFA’s Allegations
In one
notable case, NinjaTrader allegedly failed to properly investigate an account
belonging to a 20-year-old who reported income and net worth below $50,000 but
managed to deposit $82,000 within months of opening the account.
The account
was connected to an individual serving prison time for money laundering, who
was recorded placing trades despite explicit instructions prohibiting his
involvement.
The
complaint highlights systematic deficiencies in NinjaTrader’s compliance
infrastructure, including:
- Failure to
aggregate deposits across multiple accounts for monitoring purposes - Inadequate
review of suspicious activity alerts - Insufficient
investigation of accounts exceeding deposit thresholds - Failure to
screen nearly 61,000 accounts against FinCEN’s watchlist
Historical Context
This isn’t
the first time the firm has faced regulatory scrutiny. Prior to its acquisition
by NinjaTrader Group LLC in
December 2020, the company’s predecessor, York Business Associates LLC
(doing business as TransAct) was sanctioned by both the CFTC and NFA for
similar supervisory failures. The incident occurred 12 years ago, and the CFTC
imposed a fine of just under $200,000 on the company.
„Specifically,
the CFTC order finds that from about October 2007 to at least February 2008,
TransAct’s employees failed to follow-up sufficiently on “red flags” concerning
suspicious activity,” CFTC commented in 2012.
More than a
decade later, the CFTC has again imposed a penalty on NinjaTrader, citing
alleged mishandling of fraudulent accounts. As part of the settlement,
NinjaTrader Clearing agreed
to pay a $750,000 civil penalty and $233,425 in restitution to fraud
victims.
.@CFTC Orders Illinois Futures Commission Merchant to Pay More Than $980,000 for Supervision Failures: https://t.co/GV2brdqBOW
— CFTC (@CFTC) September 23, 2024
The CFTC
reported that the Illinois-based futures commission merchant failed to exercise
due diligence in supervising employee actions related to managing suspected
fraudulent accounts. Despite a statutory restraining order requiring immediate
freezing or restriction of these accounts, the firm reportedly failed to act
promptly, leading to further regulatory action.
According
to the NFA, NinjaTrader added over $192 million in customer funds between
August 2021 and May 2022, primarily through acquisitions and bulk transfers
from other firms.
This post is originally published on FINANCEMAGNATES.
