Manhattan District Attorney Robert M. Morgenthau and Gregory G. Mocek, the Director of Enforcement of the Commodity Futures Trading Commission, announced today the guilty plea of a former member of the Board of Directors of the New York Mercantile Exchange (“NYMEX”) for illegal trading on the floor of the Exchange.  In addition, three others involved in commodities trading have pleaded guilty as a result of their participation in the illegal conduct, and three others were arrested previously and their cases are pending.

STEVEN J. KARVELLAS, pleaded guilty to violating New York’s Martin Act and to Tampering With Physical Evidence, both E felonies.    From 1996 to 2006, Karvellas served as a member of NYMEX’s Board of Directors and, from 2000 to 2003, as Chairman of both the Compliance Review Committee and the Adjudication Committee of NYMEX.  KARVELLAS is the owner of two companies, Steven J. Karvellas and Co., a natural gas trading company, and Commercial Brokerage Corp., an introducing broker, both located at One North End Ave, Manhattan.
           
In pleading guilty, KARVELLAS admitted that from September 2002 to May 2003, while working as a floor broker at NYMEX, he intentionally engaged in fraudulent trading in the natural gas market.  He admitted that he delayed the execution of customer orders to buy or sell natural gas contracts to see in what direction the market was moving. If the market price moved in a direction that made the customer order immediately profitable, KARVELLAS would allocate the contracts to himself rather to the customer. In this manner, he violated his obligation to faithfully execute his customers’ orders, and stole trading profits that rightly belonged to his customers.  As a result, customer orders would then either be executed at a less favorable price, executed at a later time or not executed at all. This pattern of misappropriating customer orders enabled him to engage in risk free investing for his own account and deprived his customers of the profits they would have realized had he made the trades properly.
 
KARVELLAS also admitted to tampering with physical evidence.  Once he became aware of the investigation into trading practices on the Exchange’s floor and that certain records had been subpoenaed by a New York County Grand Jury, KARVELLAS ordered a subordinate to destroy a trading ticket which would have exposed his illegal trading practices.

KARVELLAS entered his guilty pleas before Acting Supreme Court Justice Daniel Fitzgerald.  KARVELLAS has been promised a sentence of five months in jail to be followed by five years probation. KARVELLAS will also disgorge $850,000 in profits and fines.

In addition to KARVELLAS’ plea, three other individuals involved in fraudulent commodities trading at NYMEX have pleaded guilty.  THOMAS MALONEY, a former floor broker for his company, Maloney Trading, BRIAN KEANE, a former floor clerk for Power Futures Trading Inc, and RYAN TREMBLAY, a former floor clerk who worked for a number of companies, have all pleaded guilty on charges of violating the Martin Act for trading ahead of customer orders.  MALONEY will be sentenced to probation and a $75,000 fine. KEANE is expected to be sentenced to four months jail, and TREMBLAY is expected to be sentenced to probation.

Two other former floor clerks, JOHN KOZLIK, a clerk for Maloney Trading and AL DEMICOLI, a clerk for New York Energy and Metals Executions Inc., were arrested previously, also on charges of trading ahead of customer orders, and a former NYMEX employee, ALVIN PEREZ, was arrested for commercial bribe receiving.  PEREZ is charged with accepting cash or gifts from floor brokers in exchange for sharing information about internal NYMEX investigations into brokers’ trading practices.

Mr. Morgenthau said that the investigation leading to the guilty pleas and arrests resulted from a referral from the CFTC.  After the referral, a joint investigation was commenced; the investigation is continuing.

Mr. Morgenthau thanked Mr. Mocek and the CFTC for their cooperation and for lending their expertise to the investigation and, in particular, recognized the assistance of Sheila Marhamati, Senior Trial Attorney; Judith Slowly, Futures Trading Investigator; Philip Rix, Futures Trading Investigator; Steven Ringer, Chief Trial Attorney; Lenel Hickson, Deputy Regional Counsel; Stephen J. Obie, Regional Counsel/Associate Director/Regional Administrator; Vincent McGonagle, Deputy Director; and Edward Riccobene, Associate Director.

Mr. Morgenthau also thanked the New York Mercantile Exchange for their cooperation in the investigation.

The investigation was conducted by Assistant District Attorney Adam S. Miller assisted by Senior Investigative Counsel Harold Wilson, of Investigation Division Central, under the supervision of Bureau Chief Adam Kaufmann and Deputy Bureau Chief Gary Fishman.  Also involved were paralegals Brianna Ringwood, Chris Bruno and Greg Dunleavy; Investigator Brendan Kenny, and Supervisory Investigator Steven McCallion, under the Supervision of Investigation Bureau Chief Joseph Pennisi and Deputy Terence Mulderrig; and Frank Puma, Chief of the Financial Crimes Bureau.

STEVEN J. KARVELLAS, 12/14/1959
117 Greenway
Allendale, NJ 07401-1311 

THOMAS B. MALONEY, 05/31/1961
83 Evergreen Avenue
Springfield, NJ 07081

BRIAN F. KEANE, 
6861 Yellowstone BLVD, Apt 405
Forest Hills, NY 11375-3324

JOHN F. KOZLIK, 12/27/1969
143 Armstrong Avenue
Staten Island, NY 10308
ALFRED L. DEMICOLI, 07/21/1963
251 Roosevelt Avenue
Massapequa Park, NY 11762-1722

RYAN S. TREMBLAY, 1977
126 Maple Street
Ramsey, NJ 07446-2446

ALVIN PEREZ, 12/22/1959
323 Maryland Avenue
Staten Island, NY 10305-2916

 

 

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