Company: EUO
Filing Date: 2025-03-28
Form Type: 424B3
Source: 0001193125-25-065647
Chunk: 340

Company: ProShares Trust II
Filing Date: 2025-03-28
Form: 424B3
Chunk 340
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 preservation system on behalf of all three Citi entities. This system was the primary means of ensuring that audio recordings were maintained as required by CFTC regulations. However, due to a known design flaw, the system deleted millions of audio files, including recordings that were responsive to a CFTC subpoena and which Citibank had assured the Division of Enforcement were being preserved. The order requires the Citi entities to pay a $4.5 million civil monetary penalty. “Registrants have obligations to diligently supervise all aspects of their business related to their duties, including all systems used to comply with CFTC recordkeeping requirements, document requests, and subpoenas,” said Division of Enforcement Director James McDonald. “These regulations exist to promote the integrity of the marketplace. When registrants fail to meet their supervision obligations, they will be penalized.” Case Background: According to the order, in December 2017, Division of Enforcement staff sent a subpoena to Citibank in connection with an ongoing investigation for, among other things, audio recordings of certain Citibank traders on a particular day. On February 9, 2018, Citibank communicated to Division staff that a hold notice had been issued to Citibank staff and confirmed that responsive audio recordings would be preserved. Relying on this information, Division staff agreed to Citibank’s request that it be permitted to prioritize production of electronic communications and defer production of the requested audio recordings until a later date. On October 30, 2018, Division staff requested that Citibank produce the responsive audio recordings. On December 3, 2018, Citibank notified Division staff that it had deleted the responsive recordings roughly three weeks earlier due to a design flaw in its audio preservation system. As a result, the system deleted more than 2.77 million audio files for 982 users, including recordings that were responsive to the December 2017 subpoena and which Citibank had assured Division staff were being preserved. The audio preservation system had what one Citibank employee described in a 2014 memo to senior management as a “design flaw.” As the employee described it, if the system was not configured correctly, there was a “ticking time bomb effect” that could—and here did—lead to the automatic deletion of audio recordings. Despite being on notice of the problem as of 2014, Citibank did not take timely and appropriate steps to mitigate the risk of the system’s design flaw. Citibank further did not maintain adequate internal controls with