Ex-Bank of Montreal trader to pay $14.2-million for trading scam

(Reuters via the Globe and Mail) by Nate Raymond – Bank of Montreal’s former top natural gas trader was ordered to pay $14.2-million (U.S.) in restitution on Monday after pleading guilty to charges that he inflated the value of his portfolio and conspired with others to deceive the bank. David Lee, 43, was spared prison time by U.S. District Judge Loretta Preska in Manhattan in light of his years of co-operating with authorities investigating a trading scheme that contributed to a $853-million (Canadian) loss in Bank of Montreal’s commodities trading business for 2007. Prosecutors said beginning in 2003, Lee began deliberately overstating the value of positions in his natural gas book, making it look more profitable and enabling him to earn larger bonuses. Typically, BMO would seek to independently verify those prices by comparing quotes for similar positions that the bank obtained from third-party brokerage firms, including Optionable Inc. But in 2004, Lee began subverting the process by supplying BMO prices directly to Kevin Cassidy, Optionable’s then-chief executive, who in turn would quote them back to the bank, prosecutors said. In return, Lee funnelled trades to Cassidy, resulting in Bank of Montreal generating more than 40 per cent of Optionable’s … continue reading

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