CFTC Awarded Sanctions for Contempt as to Fraud Defendant
In U.S. Commodity Futures Trading Commission v. Gramalegui, Case No. 15-02313 (D. Colo., June 14, 2017), Plaintiff, a federal institution, filed a civil action against Defendant for fraud. The action was based upon allegations of false statements made by Defendant to Plaintiff, and Plaintiffs’ failure to make required court ordered advertising disclosures. Defendant ran the Emini Trading School (ETS), in which he offered his services as a futures trading advisor and use of his futures trading system. Plaintiff alleged that Defendant made fraudulent representations in his solicitations of clients and prospective clients that they could “win every day in the markets” by following his plan, and other false statements about the success of the program. Clients instead lost money. Plaintiff also alleged that Defendant made false statements during Plaintiff’s investigation. Plaintiff sought restitution and disgorgement as well as monetary penalties and injunctive relief.
The case was rife with discovery disputes. Finally, Plaintiff filed a Motion for Criminal Contempt Sanctions, including terminating sanctions or in the alternative, an order allowing Plaintiff the use of 2,500 emails proudced days before the close of discovery but barring Defendant’s ability to object to their use at trial. The court had previously found pervasive bad faith and intentional discovery abuses on Defendant’s part.
The 2,500 emails were produced at the last minute after Defendant discovered he could log into an email account “by serendipity” despite his “disorganization and forgetfulness”. Defendant tried to argue that there was no harm, as Plaintiff had “plenty of time to use the emails”.
The court found that Plaintiff was prejudiced by Defendant’s actions. The court also found that Defendant interfered with the judicial process, by depriving Plaintiff of evidence that could provide the truth. The court found Defendant “highly culpable”, citing its previous order to show specific examples of how Defendant could have complied with discovery. The Court determined that Defendant spoliated emails and then could not recover them until just before the end of the discovery period. The court could not find, however, that default judgment was the appropriate sanction. Although Defendant’s conduct was egregious, Defendant did not put Plaintiff in a position where it was prevented from proceeding to trial. Therefore, the court instead ordered that Plaintiff could use the 2.500 emails for any purpose at trial and that Defendant was barred from making any evidentiary objections to their use. The court also found that Defendant’s behavior was contemptuous and warranted sanctions for contempt. The magistrate judge recommended a severe monetary penalty as well as an award of Plaintiff’s costs and fees.