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Targeted Trader, His Firm Fined $550,000 by Comex

August 24, 1989 GMT

NEW YORK (AP) _ A reported target of the government’s investigation of New York’s futures markets and his firm were fined a total of $550,000 today for violating trading rules at the Commodity Exchange.

Preston H. Semel, who runs a brokerage in gold, silver and other commodities, was cited after an internal exchange investigation of various trading rules violations, including ones that apparently parallel a separate federal probe.

Comex spokesman Robert McGrath said Semel was fined $350,000 and suspended for nine months from the exchange. His firm, Semel & Co., was fined $200,000.

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The violations by Semel involve improper cross-trading and prohibited dual trading, two offenses that center on trading for customers and personal accounts.

Semel, 39, and his firm were cited under exchange rules for misconduct, disreputable or fraudulent conduct and conduct detrimental to the exchange.

The charges listed generally involve a practice know as ″front-running″ - getting an unfair advantage by trading for personal accounts ahead of customer orders for the same commodity.

A person answering the telephone at Semel & Co. said no one would be available for comment.

The government in May revealed it was conducting criminal and civil investigations of alleged illegal trading at the Comex and three other New York futures exchanges. The probes are unrelated to a longstanding probe of Chicago’s commodity markets that recently yielded 46 indictments for racketeering and fraud.

Semel is one of several traders being investigated by the U.S. attorney’s office and the Commodity Futures Trading Commission, according to people familiar with the investigation.

The CFTC probe reportedly examines violations that include pre-arranged trading, use of advance knowledge of customer trades to trade for personal accounts and conducting of trades in order to skirt tax obligations.

The criminal probe reportedly examines alleged front-running at the exchanges and whether brokers and traders illegally shared information with each other about customer orders.

A complaint against Semel by the Comex was issued in June 1988 for trading that took place prior to that time, McGrath said. He refused to release other details about the exchange’s internal probe of Semel.

In addition to the Comex, the government in May issued subpoenas to the New York Mercantile Exchange; the Coffee, Sugar and Cocoa Exchange; and the Cotton Exchange.

More than 50 traders received subpoenas overall and federal authorities are examining boxes of documents provided by the exchanges and traders, according to defense lawyers. No action in the federal probe is expected for at least two months, lawyers said.