In the Matter of: 

UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

) 

) 

) 

) 

Classic Energy LLC and Mathew D. 

Webb 

) CFTC Docket No: 19-50 

) 

) 

Respondents. ) 

) 

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (d) OF THE COMMODITY EXCHANGE ACT, 

MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS 

I. INTRODUCTION 

The Commodity Futures Trading Commission ("Commission") has reason to believe that 

from at least April 30, 2014, through September 3, 2015, Classic Energy LLC ("Classic") and 

Mathew D. Webb ("Webb") (collectively, "Respondents") violated Section 6(c)(l) of the 

Commodity Exchange Act, ("Act" or "CEA"), 7 U.S.C. § 9(1) (2012), and Commission 

Regulations ("Regulations") 155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3), 17 C.F.R. 

§§ 155.4(b)(2)(i), 166.3, 180.l(a)(l), (3) (2019). In addition, for the period of August 2014 

through August 13, 2015, Classic violated Section 4g(a) of the Act, 7 U.S.C. § 6g(a) (2012) and 

Regulations 1.31 (b )(2) and l.35(a)(l )(iii), 17 U.S.C. §§ 1.31 (b )(2), l.35(a)(l )(iii) (2019). 

Therefore, the Commission deems it appropriate and in the public interest that public 

administrative proceedings be, and hereby are, instituted to determine whether Respondents 

engaged in the violations set forth herein, and to determine whether any order should be issued 

imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, Respondents have 

submitted an Offer of Settlement ("Off er") that the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, Respondents consent to 

the entry of this Order Instituting Proceedings Pursuant to Section 6(c) and (d) of the Commodity 

Exchange Act, Making Findings, and Imposing Remedial Sanctions ("Order"), and acknowledge 

service of this Order. 1 

1 Respondents consent to the use of the findings of fact and conclusions of law in this Order in this proceeding and 

in any other proceeding brought by the Commission or to which the Commission is a party or claimant, and agrees 

that they shall be taken as true and correct and be given preclusive effect therein, without further proof. 

Respondents do not consent, however, to the use of this Order, or the findings or conclusions herein, as the sole 
II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

Classic is a voice broker that facilitates block trades between its customers in natural gas 

futures contracts and other products. Webb is Classic' s founder and president, who also 

brokered block trades for Classic' s customers. 

Webb defrauded Classic' s brokerage customers by executing block trades between a 

Classic customer and a proprietary trading account he owned and controlled, without disclosing 

to the customer that he was acting as a counterparty. Webb did this sixty-three times between 

April 30, 2014, and September 3, 2015. In those instances, Webb defrauded Classic's brokerage 

customers in two ways. First, Webb misappropriated material, nonpublic information from 

Classic's customers by trading on these customers' block trade orders, to which Webb had 

access, in violation of his duties to these customers. Second, Webb created the false impression 

for Classic's customers that he was acting as a broker, not a potential block trade counterparty, 

and led Classic' s customers to think that the bids and offers he provided reflected bids or offers 

available from other market participants, when in fact those bids and offers reflected only the 

prices at which Webb was willing to execute a block trade in a proprietary trading account 

controlled by him. Through this fraudulent conduct, Webb realized over $400,000 in trading 

profits in his proprietary trading account. Classic is vicariously liable for Webb's fraud. 

Classic also failed to retain audio recordings of block trades executed by its brokers over 

the phone, as required by Regulations l.3 l(b)(2) and l.35(a)(l)(iii), 17 C.F.R. §§ l.3 l(b)(2), 

l.35(a)(l)(iii) (2019), for the period of August 2014 through August 13, 2015. Classic 

outsourced the preparation and retention of these audio recordings to a third-party service 

provider. Sometime between May and August 2015, this third-party service provider 

encountered technical issues that resulted in the loss of all audio recordings of block trades 

executed over the phone before August 13, 2015, including many of the block trades that Webb 

executed with Classic' s brokerage customers. Classic did not discover these technical issues 

until August 2015. 

Classic and Webb failed to supervise Classic' s employees and agents in two respects. 

First, Classic and Webb had inadequate policies and procedures in place to ensure that its brokers 

did not execute block trades with Classic's brokerage customers in violation of Regulation 155.4, 

17 C.F.R. § 155.4 (2019), and did not misappropriate or otherwise disclose the material, 

nonpublic information of Classic's customers. Second, Classic and Webb failed to ensure 

diligent oversight over the third-party service provider to whom Classic delegated its 

recordkeeping obligations and thus did not detect the technical failures that resulted in the loss of 

audio recordings in time to mitigate this loss. 

basis for any other proceeding brought by the Commission or to which the Commission is a party or claimant, other 

than: a proceeding in bankruptcy or receivership; or a proceeding to enforce the terms of this Order. Respondents 

do not consent to the use of the Offer or this Order, or the findings or conclusions in this Order, by any other party in 

any other proceeding. 

2 
B. RESPONDENTS 

Classic Energy LLC is a registered introducing broker headquartered in Houston, Texas. 

Among other services, Classic brokers block trades for customers in energy futures and other 

products listed on ICE Futures, U.S. ("ICE") and other designated contract markets. 

Mathew D. Webb is the founder, president, sole member, and was a registered 

associated person of Classic Energy. Webb brokered block trades in futures listed on ICE for 

Classic customers. Webb was also the sole member ofMDW Capital, LLC ("MDW"), a 

proprietary trading company that engaged in block trades in the same energy futures contracts 

brokered by Classic. 

C. FACTS 

1. Classic's Block Trade Brokerage Business 

Classic facilitates block trades for its brokerage customers in natural gas futures contracts 

and other products, including natural gas futures listed on ICE such as the Henry LDl Fixed 

Price Future ("H Contract") and the Dominion South Basis Future ("DOM Contract"). Block 

trades are privately negotiated transactions involving exchange-listed futures contracts that meet 

the minimum quantity threshold determined by the exchange. Block trades are executed noncompetitively away from the exchange' s order book, but are submitted for clearing to the 

exchange' s clearing house. 

Classic is a "voice broker" that solicits and receives requests from its customers to enter 

into block trades via phone or instant message ("IM"). Classic then locates potential 

counterparties for the requested block trades either from among Classic' s other customers or the 

customers of another voice broker. Classic' s customers consider their block trade requests and 

other information they provide to voice brokers regarding their trading intentions to be 

confidential and nonpublic, and provide this information to Classic brokers with the expectation 

that Classic brokers will only use that information to locate potential block trade counterparties. 

When locating potential counterparties for requested block trades, Classic brokers necessarily 

disclose to other market participants the existence of a potential buyer or seller of a particular 

contract, as well as price and quantity information, but they do not disclose the identity of the 

customer making the block trade request. Classic is paid a commission for each block trade it 

executes on behalf of its customers. 

Classic and its customers understood and agreed that Classic acted as an agent of its 

customers with authority to bind them in transactions involving natural gas futures and other 

products, including block trades in natural gas futures contracts listed on ICE. Classic's written 

agreements with its customers explicitly required that Classic keep confidential its customers' 

confidential and proprietary information. These written agreements also expressly stated that 

Classic could not act as a principal to any transactions involving natural gas futures or other 

products for which Classic provides brokerage services. 

3 
2. Webb Misappropriated Confidential Customer Information and Defrauded 

His Brokerage Customers by Taking the Other Side of His Customer's Block 

Trades 

Between April 30, 2014, and September 3, 2015, Webb, acting as an affiliated person of 

Classic, received block trade requests from Classic' s customers for natural gas futures contracts, 

including the H Contract and the DOM contract. During this period, Webb also maintained a 

proprietary trading account in the name ofMDW, a limited-liability company he wholly owned 

and controlled. In the MDW account, Webb traded the same natural gas futures contracts for 

which he was brokering block trades for Classic' s customers. 

On sixty-three instances between April 30, 2014, and September 3, 2015, Webb received 

requests from Classic's customers for block trades in the Hor DOM contract. Instead oflocating 

a counterparty from among Classic's other customers or the customers of another voice broker, 

as his customers expected, Webb executed a block trade between the customer and the MDW 

account, knowing that the MDW account was taking the other side of the customer's block trade. 

Webb never disclosed to Classic' s customers, either at the time the block trade was executed or 

at any other time, that he was taking the other side of their requested block trade in the MDW 

account. 

By executing block trades between the MDW account and Classic's customers in this 

manner, Webb defrauded these customers in two ways. First, Webb misappropriated material, 

nonpublic information from Classic customers by trading on the customers' block trade orders in 

violation of his duties to the customers. Second, Webb created the false impression that he was 

acting as a broker, not a potential block trade counterparty, and led Classic's customers to think 

that the bids and offers he provided reflected bids or offers available from other market 

participants, when in fact those bids and offers reflected only the prices at which Webb was 

willing to execute a block trade in the MDW account. Webb reinforced this false impression by 

charging his customers brokerage commissions on each of the sixty-three block trades between 

his customers and the MDW account, just as he did for trades he brokered between his customers 

and other market participants. 

Through this fraudulent scheme, Webb was able to obtain for the MDW account block 

trade prices that otherwise may not have been available if Webb were openly participating as a 

trader in the block trade market. Indeed, Webb realized trading profits for the MDW account by 

offsetting the block trade positions he established with Classic' s customers with either other 

block trades or trades executed on ICE's electronic trading platform. On some occasions Webb 

executed these offsetting trades himself. On other occasions, another trader employed by MDW 

but who was located on Classic' s brokerage floor executed the offsetting block trades or 

electronic trades. Between April 30, 2014, and September 3, 2014, Webb realized in the MDW 

account trading profits of $413,065 on the sixty-three block trades he executed with Classic's 

customers. 

3. Classic Failed To Maintain Records of Block Trades 

Classic used a third-party service provider to record and maintain oral communications 

relating to block trades brokered by Classic and to comply with its recordkeeping obligations 

4 
under Section 4g of the Act, 7 U.S.C. § 6g (2012), and Regulations l.31(b)(2) and l.35(a)(l)(iii). 

Sometime between May 2015 and August 2015, this third-party service provider encountered 

technical issues that resulted in (1) the loss of all existing audio recordings of block trade 

communications and (2) the failure of the system to make audio recordings of any new block 

trade communications. Classic's compliance officer did not discover these problems until 

sometime in August 2015, in the course ofresponding to an audit conducted by ICE. As a result, 

Classic did not have audio recordings for block trade communications for any block trades 

brokered by Classic before August 13, 2015, including audio recordings for the block trades that 

Webb executed with Classic's brokerage customers by phone. 

4. Classic and Webb Failed To Supervise 

As a registered introducing broker, Classic was obligated under Regulation 166.3, 17 

C.F.R. § 166.3 (2019), to diligently supervise the handling of all commodity interest accounts 

introduced by Classic and all other activities of its partners, officers, employees, and agents. As 

an associated person ("AP") of Classic with supervisory duties, Webb also had a duty to 

diligently supervise. From at least April 30, 2014, through September 3, 2015, Classic and 

Webb failed to ensure that Classic had an adequate system of oversight in place to detect or 

prevent its brokers or other affiliated persons from either taking the other side of customer block 

trades in violation of Regulation 15 5 .4, or misappropriating material, nonpublic information 

from Classic's customers. For example, Classic did not have an adequate compliance manual or 

other written policies that set forth for its employees standards of conduct, relevant Commission 

or exchange rules, and prohibited brokerage and trading practices. Classic also did not have any 

procedures in place to monitor or review the activities of Classic' s brokers. Although Classic 

had a compliance officer, and this compliance officer was generally aware that Webb was 

trading for the MDW account while also brokering block trades for Classic's customers, this 

compliance officer never reviewed any of Webb's brokerage or trading activity or took any other 

steps to determine whether Webb was trading in the MDW account in violation of his duties to 

Classic' s customers. 

In addition, Classic and Webb also allowed an independent trader, who traded solely on 

behalf ofMDW, to sit on Classic's brokerage floor within earshot of many Classic brokers. 

From this location, this trader had access to block trade requests and other material, nonpublic 

information provided by Classic' s customers to Classic brokers, and the ability to trade on this 

information in the MDW account. Classic and Webb did not put in place any safeguards to 

prevent Classic's brokers from intentionally or unintentionally disclosing their customers' 

material, nonpublic information to this trader. 

Classic delegated its recordkeeping obligations under Section 4g of the Act and 

Regulations l.31(b)(2) and l.35(a)(l)(iii) to a third-party service provider. Classic and Webb 

failed to ensure that this third-party service provider was adequately supervised and was 

fulfilling Classic' s recordkeeping obligations. Classic did not have an adequate compliance 

manual or any other policies or procedures that set forth any guidelines or practices for the 

preparation and retention of audio recordings. Classic and Webb delegated to Classic's 

compliance officer responsibility for the preparation and maintenance of audio recordings and 

oversight of the third-party service provider responsible for doing so. Between May 2015 

through August 2015, Classic's compliance officer did not conduct checks of the third-party 

5 
service provider's systems sufficient to determine that audio recordings of block trade 

communications were not being prepared and retained until after the issue was discovered in 

August 2015, in response to an exchange inquiry. Consequently, Classic's compliance officer 

was not able to mitigate the third-party service provider's loss of recordings. As a result, Classic 

could not produce the audio recordings of block trade communications requested by ICE in the 

course of its audit. 

A. 

III. LEGAL DISCUSSION 

Webb's Fraudulent Scheme and Misappropriation of Material, Nonpublic 

Information Violated Section 6(c)(l) of the Act and Regulation 180.l(a)(l) and (3) 

Under Section 6(c)(l) of the Act, 7 U.S.C. § 9(1) (2012), and Regulation 180.l(a)(l) and 

(3), 17 C.F.R. § 180.l(a)(l), (3) (2019), it is unlawful for any person, directly or indirectly to 

intentionally or recklessly: (1) use or employ, or attempt to use or employ, any manipulative 

device, scheme, or artifice to defraud; ... or (3) engage, or attempt to engage, in any act, 

practice, or course of business, which operates or would operate as a fraud or deceit upon any 

person. 

Trading on material, nonpublic information in breach of a pre-existing duty may violate 

Section 6( c )(1) and Regulation 180.1. As the Commission has expressly stated, "[ d]epending on 

the facts and circumstances, a person who engages in deceptive or manipulative conduct in 

connection with any swap, or contract of sale of any commodity in interstate commerce, or 

contract for future delivery on or subject to the rules of any registered entity,/or example by 

trading on the basis of material nonpublic information in breach of a pre-existing duty 

( established by another law or rule, or agreement, understanding, or some other source), or by 

trading on the basis <4·material nonpublic information that was obtained through fraud or 

deception, may be in violation of final Rule 180.1." Prohibition on the Employment, or 

Attempted Employment, of Manipulative and Deceptive Devices and Prohibition on Price 

Manipulation, 76 Fed. Reg. 41,398, 41,403 (emphasis added); see, e.g., In re Jon P. Ruggles, 

CFTC No. 16-34, 2016 WL 5682206 (Sept. 29, 2016) (consent order) (finding that trader 

violated Section 6( c )( 1) and Regulation 180.1 by using his knowledge and access to employer's 

trading strategies to match trades with a personal trading account); In re Motazedi, CFTC No. 

16-02, 2016 WL 7880066 (Dec. 2, 2015) (consent order) (finding that trader violated Section 

6(c)(l) and Regulation 180.1 by using employer's trading information to trade for his own 

benefit); United States v. 0 'Hagan, 521 U.S. 642, 652 (1997) (holding that a person violates 

SEC Rule 1 0b-5 by misappropriating confidential information for securities trading purposes in 

breach of a duty owed to the source of the information). 

The undisclosed trading on the basis of material, nonpublic information in breach of a 

duty defrauds the source of the exclusive use of the information. Motazedi, 2016 WL 7880066 

*5 (citing O'Hagan, 521 U.S. at 652); see O'Hagan, 521 U.S. at 652 ("Under th[e] 

misappropriation theory, a fiduciary's undisclosed, self-serving use of a principal's information 

to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the 

6 
principal of the exclusive use of that information.").2 Such trading deceives not only the source 

of the information but harms the integrity of the markets and the investing public. 0 'Hagan, 521 

U.S. at 652-53, 658. 

On sixty-three occasions between April 30, 2014, and September 3, 2015, by receiving 

block trade requests from Classic's customers and then taking the other side of the customer's 

block trade in his own trading account, Webb intentionally or recklessly misappropriated 

material nonpublic information from Classic's customers for his own benefit in violation of the 

duties he owed to these customers. Webb owed duties to his customers as an affiliated person of 

an introducing broker under Regulation 155.4, 17 C.F.R. § 155.4 (2019), set forth below and 

which he also violated, under the brokerage agreements between Classic and its customers, and 

as an agent of these customers for the purposes of facilitating block trades. Consequently, Webb 

violated Section 6(c)(l) of the Act and Regulation 180.l(a)(l) and (3). 

In addition, Webb violated Section 6(c)(l) of the Act and Regulation 180.l(a)(l) and (3) 

when he created the false impression for Classic's customers that he was acting as a broker, not a 

potential block trade counterparty, and led Classic's customers to think that the bids and offers 

he provided reflected bids or offers available from other market participants, when in fact those 

bids and offers reflected only the prices at which Webb was willing to execute a block trade in a 

proprietary trading account controlled by him. By doing so, Webb engaged in a scheme and 

artifice to defraud and a course of conduct that operated as a fraud on Classic's customers. See 

CFTC v. S. Trust Metals, Inc., 894 F.3d 1313, 1326 (11th Cir. 2018) (holding that defendant 

violated Regulation 180 .1 when it "misrepresented to customers the fundamental nature of their 

investments"); cf SEC v. Dorozhko, 574 F.3d 42, 51 (2d Cir. 2009) (holding that 

"misrepresenting one's identity in order to gain access to information that is otherwise off limits" 

is deceptive conduct under Section 10(b)(5) of the Securities Exchange Act of 1934 and SEC 

Rule lOb-5). 

B. Regulation 155.4(b)(2){i)-Trading Standards for Introducing Brokers 

Regulation 155.4(b)(2)(i) expressly provides that no introducing broker or any of its 

affiliated persons shall: 

knowingly take, directly or indirectly, the other side of any order of another 

person revealed to the introducing broker or any of its affiliated persons by reason 

of their relationship to such other person, except with such other person's prior 

consent and in conformity with contract market rules approved by or certified to 

the Commission. 

2 As the Supreme Court observed in O 'Hagan, "misappropriators ... deal in deception. A fiduciary who '[pretends] 

loyalty to the principal while secretly converting the principal's information for personal gain' 'dupes' or defrauds 

the principal. The undisclosed misappropriation of such information, in violation of a fiduciary duty, ... constitutes 

fraud akin to embezzlement." 521 U.S. at 653-54. Consequently, the Court held that "misappropriation, as just 

defined, satisfies [the Securities Exchange Act of 1934] § IO(b)'s requirement that chargeable conduct involve a 

"deceptive device or contrivance" used "in connection with" the purchase or sale of securities. Id. at 653. 

7 
On sixty-three occasions between April 30, 2014, and September 3, 2015, Webb, acting 

as an affiliated person of Classic, a registered introducing broker, received block trade orders that 

Classic' s customers disclosed to Webb for the purpose of executing block trades with other 

market participants. By taking the other side of these block trades with Classic's customers 

without first obtaining prior consent from these customers, Webb violated Regulation 

155.4(b)(2)(i). 

C. Section 4g and Regulations 1.31 and 1.35(a)(l)(iii)-Recordkeeping 

Section 4g of the Act, 7 U.S.C. § 6g (2012), requires introducing brokers to maintain 

books and records pertaining to certain "transactions and positions in such form and manner and 

for such period as may be required by the Commission." Regulations 1.31 (b )(2) and 

l.35(a)(l )(iii), 17 C.F.R. §§ 1.31 (b )(2), l.35(a)(l)(iii) (2019), further elaborate this requirement. 

Regulation l.35(a)(l)(iii) requires certain registered introducing brokers, including Classic, to 

keep all oral and written communications that lead to the execution of a block trade involving 

futures contracts. Regulation 1.31 (b )(2) requires introducing brokers, that are required to keep 

oral communications, to retain such oral communications for one year from the date of the 

communication. 

A violation of these record-keeping regulations does not require sci enter. In re GNP 

Commodities, CFTC No. 89-1, 1992 WL 201158, at *15 (Aug. 11, 1992); see also In re 

DiPlacido, CFTC No. 01-23, 2008 WL 4831204, at *37 (Nov. 5, 2008); In re Buckwalter, CFTC 

No. 80-28, 1991 WL 83522, at *26-27 (Jan. 25, 1991). 

Classic violated Section 4g and Regulations 1.31 (b )(2) and 1.35(a)(l)(iii) for the period 

of August 2014 through August 13, 2015, by failing to keep and retain audio recordings that 

contained oral communications that led to the execution of block trades involving futures 

contracts. 

D. Regulation 166.3-Failure To Supervise 

Regulation 166.3 states: 

Each Commission registrant, except an associated person who has no supervisory 

duties, must diligently supervise the handling by its partners, officers, employees 

and agents ( or persons occupying a similar status or performing a similar 

function) of all commodity interest accounts carried, operated, advised or 

introduced by the registrant and all other activities of its partners, officers, 

employees and agents ( or persons occupying a similar status or performing a 

similar function) relating to its business as a Commission registrant. 

17 C.F.R. § 166.3 (2019). A violation under Regulation 166.3 is an independent violation for 

which no underlying violation is necessary. See In re Collins, CFTC No. 94-13, 1997 WL 

761927, at *10 (Dec. 10, 1997). 

A violation of Regulation 166.3 is demonstrated by showing either that: (1) the 

registrant's supervisory system was generally inadequate; or (2) the registrant failed to perform 

its supervisory duties diligently. In re Murlas Commodities, Inc., CFTC No. 85-29, 1995 WL 

8 
523563, at *9 (Sept. 1, 1995); Sansom Refining Co. v. Drexel Burnham Lambert, Inc., CFTC No. 

82-R448, 1990 WL 282783, at *11 (Feb. 16, 1990) (noting that, under Regulation 166.3, an 

FCM has a "duty to develop procedures for the detection and deterrence of possible wrongdoing 

by its agents" (internal quotation omitted)); In re GNP Commodities, Inc., CFTC No. 89-1, 1992 

WL 201158, at* 17-19 (Aug. 11, 1992) (providing that, even if an adequate supervisory system 

is in place, Regulation 166.3 can still be violated if the supervisory system is not diligently 

administered). Evidence of violations that "should be detected by a diligent system of 

supervision, either because of the nature of the violations or because the violations have occurred 

repeatedly" is probative of a failure to supervise. In re Paragon Futures Assoc., CFTC No. 88-

18, 1992 WL 74261, at *14 (Apr. 1, 1992). 

From April 30, 2014, through September 3, 2015, Classic was a registered introducing 

broker and Webb, as Classic's president, had supervisory duties at Classic. Classic and Webb, as 

a supervisory AP, violated Regulation 166.3 because Classic had no adequate system of 

oversight in place over and did not diligently supervise Webb's (or any other Classic 

employee's) activity sufficient to detect or prevent misappropriation of material, nonpublic 

information from Classic' s customers or conduct that violated the trading standards for 

introducing brokers set forth in Regulation 155.4(b)(2)(i). Specifically, (1) Classic and Webb 

failed to ensure that Classic established any written policies or procedures that set forth for 

Classic's employees standards of conduct or prohibited trading or brokerage practices; (2) 

neither Classic' s compliance officer nor anyone else at Classic adequately reviewed or monitored 

the brokerage activity of Webb and other Classic employees and thus were not in a position to 

detect instances in which Webb executed block trades with Classic's customers; and (3) Classic 

and Webb allowed an independent trader to sit on Classic' s trading floor where he had access to 

material, nonpublic information of Classic' s customers, without instituting any procedures to 

guard against disclosure of such information to this trader. 

Classic and Webb also violated 166.3 because they did not diligently supervise the 

preparation and retention of audio recordings of communications that led to the execution of 

block trades. Between May 2015 and August 2015, Classic and Webb failed to ensure adequate 

oversight over the third-party service provider responsible for the preparation and retention of 

these audio recordings. Specifically, Classic's compliance officer, who was responsible for 

ensuring Classic's compliance with Regulations l.31(b)(2), and l.35(a)(l)(iii), failed to take 

sufficient steps up until August 2015 to determine whether the third-party service provider was 

actually preparing and retaining audio recordings, and as a result was not able to mitigate the 

third-party service provider's loss ofrecordings. 

E. Vicarious Liability 

Section 2(a)(l)(B) of the Act, 7 U.S.C. § 2(a)(l)(B) (2012), and Regulation 1.2, 17 

C.F .R. § 1.2 (2019), provide that the act, omission, or failure of any official, agent, or other 

person acting for any individual, association, partnership, corporation, or trust within the scope 

of his employment or office shall be deemed the act, omission, or failure of such individual, 

association, partnership, corporation, or trust. Pursuant to Section 2(a)(l)(B) of the Act and 

Regulation 1.2, strict liability is imposed on principals for the actions of their agents. See, e.g., 

Rosenthal & Co. v. CFTC, 802 F.2d 963, 966 (7th Cir. 1986); Dahmen-Ramirez & Wellington 

Advisory, Inc. v. CFTC, 837 F.2d 847, 857-58 (9th Cir. 1988). 

9 
In order to establish liability under Section 2(a)(l)(B) of the Act and Regulation 1.2, the 

Commission must show that (1) Webb was acting as Classic's agent when he engaged in the 

misconduct above, and (2) that Webb's actions were within the scope of his employment or 

office. Guttman v. CFTC, 197 F.3d 33, 39 (2d Cir. 1999). Classic need not have participated in 

Webb's conduct or controlled it for the purpose of imposing liability, so long as he was "acting 

for" Classic at the time. Id. 

Webb's duties included receiving and brokering block trade orders from Classic's 

customers, including those whose material, non-public information he misappropriated. Webb's 

misconduct, therefore, was both "for" Classic and within the scope of his agency with Classic. 

Id. 3 Accordingly, Classic is liable for Webb's violations of Section 6(c)(l) of the Act and 

Regulations 155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3) pursuant to Section 2(a)(l)(B) of the 

Act and Regulation 1.2. 

F. Control Person Liability 

Section 13(b) of the Act, 7 U.S.C. § 13c(b) (2012), provides that "[a]nyperson who, 

directly or indirectly, controls any person who has violated any provision of this chapter or any 

of the rules, regulations, or orders issued pursuant to this chapter may be held liable for such 

violation in any action brought by the Commission to the same extent as such controlled person." 

The "fundamental purpose" of the statute is "to reach behind the corporate entity to the 

controlling individuals of the corporation and to impose liability for violations of the Act directly 

on such individuals as well as the corporation itself." CFTC v. R.J Fitzgerald & Co., Inc., 310 

F.3d 1321, 1334 (11th Cir. 2002) (citing JCC, Inc. v. CFTC, 63 F.3d 1557, 1567 (11th Cir. 

1995)). To establish liability, the Commission must show "that the defendant exercised general 

control over the operation of the entity principally liable and possessed the power or ability to 

control the specific transaction or activity upon which the primary violation was predicated, even 

if such power was not exercised." CFTC v. Int'! Fin. Servs., Inc., 323 F. Supp. 2d 482, 504 

(S.D.N.Y. 2004) (quoting CFTC v. Baragosh, 278 F.3d 319,330 (4th Cir. 2002)). Control is 

"the possession, direct or indirect, of the power to direct or cause the direction of the 

management and policies of a person, whether through the ownership of voting securities, by 

contract, or otherwise." In re Spiegel, CFTC No. 85-19, 1988 WL 232212, at *4 n.4 (Jan. 12, 

1988). "Section 13[](b), therefore, is about power, and imposing liability for those who fail to 

exercise it to prevent illegal conduct." R.J Fitzgerald, 310 F.3d at 1334. 

A controlling person is liable for the controlled person's violations if that controlling 

person "did not act in good faith or knowingly induced, directly or indirectly, the act or acts 

constituting the violation." Section 13(b) of the Act. Proof of recklessness will demonstrate that 

the controlling person acted in bad faith, although negligence alone is insufficient. Monieson v. 

CFTC, 996 F.2d 852, 860 (7th Cir. 1993) (finding FCM's chairman of the board liable as 

controlling person because he failed to enforce supervision system with reasonable diligence, 

including failing to act in response to repeated charges of illegal behavior from different 

sources). "Knowing inducement" requires a showing that "the controlling person had actual or 

3 Webb's misappropriation of material, non-public information in connection with the block trades, while benefitting 

him personally, also benefited Classic, by, among other things, earning Classic commissions from the customers' 

trades. 

10 
constructive knowledge of the core activities that constitute the violation at issue and allowed 

them to continue." In re Spiegel, 1988 WL 232212, at *7 (footnote omitted). 

From at least April 30, 2014, through September 3, 2015, Webb controlled Classic, 

directly or indirectly, and did not act in good faith or knowingly induced, directly or indirectly, 

Classic's acts in violation of the Act and Regulations; therefore, under Section 13(b) of the Act, 

Webb is liable for Classic's violations of Section 6(c)(l) of the Act and Regulations 

155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3). 

IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that from at least April 30, 2014, through 

September 3, 2015, Classic and Webb violated Section 6(c)(l) of the Act, 7 U.S.C. § 9(1) 

(2012), and Regulations 155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3), 17 C.F.R. 

§§ 155.4(b)(2)(i), 166.3, and 180.l(a)(l), (3) (2019). In addition, for the period of August 2014 

through August 13, 2015, Classic violated Section 4g(a), 7 U.S.C. § 6g(a) (2012) and 

Regulations 1.3 l(b)(2) and 1.35(a)(l)(iii), 17 U.S.C. §§ 1.3 l(b)(2), l.35(a)(l)(iii)(2019). 

V. OFFER OF SETTLEMENT 

Classic and Webb have submitted an Offer in which they, without admitting or denying 

the findings and conclusions herein: 

A. Acknowledge receipt of service of this Order; 

B. Admit the jurisdiction of the Commission to all the matters set forth in this Order and for 

any action or proceeding brought or authorized by the Commission based on violation of 

or enforcement of this Order; 

C. Waive: 

1. 

2. 

3. 

4. 

5. 

The filing and service of a complaint and notice of hearing; 

A hearing; 

All post-hearing procedures; 

Judicial review by any court; 

Any and all objections to the participation by any member of the Commission's 

staff in the Commission's consideration of the Offer; 

6. Any and all claims that they may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504 (2012) and 28 U.S.C. § 2412 (2012), and/or the rules promulgated 

by the Commission in conformity therewith, Part 148 of the Commission's 

Regulations, 17 C.F .R. pt. 148 (2019), relating to, or arising from, this 

proceeding; 

11 
7. Any and all claims that they may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, tit. II,§§ 201-253, 110 

Stat. 847, 857-74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

sections of 5 U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; 

and 

8. Any claims of Double Jeopardy based upon the institution of this proceeding or 

the entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order; 

D. Stipulate that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Classic and Webb have consented (in the Offer) 

to the Commission making in this order; and 

E. Consent, solely on the basis of the Offer, to the Commission's entry of this Order, which 

in turn: 

1. Makes findings by the Commission that Classic and Webb violated Section 

6(c)(l) of the Act, 7 U.S.C. § 9(1) (2012), and Regulations 155.4(b)(2)(i), 166.3, 

and 180.l(a)(l) and (3), 17 C.F.R. §§ 155.4(b)(2)(i); 166.3; 180.l(a)(l), (3) 

(2019); that Classic violated Section 4g(a), 7 U.S.C. § 6g(a) (2012) and 

Regulations l.3l(b)(2) and 1.35(a)(l)(iii), 17 C.F.R. §§ 1.31(b)(2), 1.35(a)(l)(iii) 

(2019); and that Webb is liable for Classic's violation of Section 6(c)(l) of the 

Act and Regulations 155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3) pursuant to 

Section 13(b) of the Act, 7 U.S.C. § 13c(b) (2012); 

2. Orders Classic and Webb to cease and desist from violating Section 6(c)(l) of 

the Act and Regulations 155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3); and 

Classic to cease and desist from violating Section 4g(a) of the Act and 

Regulations 1.3 l(b)(2) and 1.35(a)(l)(iii). 

3. Orders Classic and Webb to pay, jointly and severally, a civil monetary penalty 

in the amount of one million five hundred thousand dollars ($1,500,000), plus 

post-judgment interest, within ten days of the date of the entry of this Order; 

4. Orders that Webb be prohibited from, directly or indirectly, engaging in trading 

on or subject to the rules of any registered entity (as that term is defined in 

Section la(40) of the Act, 7 U.S.C. § la(40) (2012)), until January 3, 2022, and 

all registered entities shall refuse him trading privileges during that period; and 

5. Orders Classic and Webb to comply with the conditions, undertakings, and 

representations consented to in the Offer and set forth in Part VI of this Order, 

including the undertaking that Webb pay disgorgement in the amount of 

$413,065 (less any disgorgement Webb has already paid to ICE in connection 

with the settlement between ICE and Webb announced on December 14, 2016), 

plus post-judgment interest, according to the terms set forth below. 

Upon consideration, the Commission has determined to accept the Offer. 

12 
VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. Classic and Webb shall cease and desist from violating Section 6(c)(l) of the Act, 7 

U.S.C. § 9(1) (2012) and Regulations 155.4(b)(2)(i), 166.3, and 180.l(a)(l) and (3), 17 

C.F.R. §§ 155.4(b)(2)(i); 166.3; 180.l(a)(l), (3) (2019); and Classic shall cease and desist 

from violating Section 4g(a) of the Act, 7 U.S.C. § 6g(a) (2012) and Regulations 

1.31(b)(2) and l.35(a)(l)(iii), 17 C.F.R. §§ 1.31(b)(2), 1.35(a)(l)(iii) (2019). 

B. Classic and Webb shall, jointly and severally, pay a civil monetary penalty in the amount 

of $1,500,000 (the "CMP Obligation"), within ten days of the date of the entry of this 

Order. If the CMP Obligation is not paid in full within ten days of the date of entry of 

this Order, then post-judgment interest shall accrue on the CMP Obligation beginning on 

the date of entry of this Order and shall be determined by using the Treasury Bill rate 

prevailing on the date of entry of this Order pursuant to 28 U.S.C. § 1961 (2012). 

Classic and Webb shall pay the CMP Obligation and any post-judgment interest by 

electronic funds transfer, U.S. postal money order, certified check, bank cashier's check, 

or bank money order. If payment is to be made other than by electronic funds transfer, 

then the payment shall be made payable to the Commodity Futures Trading Commission 

and sent to the address below: 

MMAC/ESC/ AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 181 

Oklahoma City, OK 73169 

( 405) 954-6569 office 

(405) 954-1620 fax 

9-AMC-AR-CFTC@faa.gov 

If payment is to be made by electronic funds transfer, Respondents shall contact Marie 

Thome or her successor at the above address to receive payment instructions and shall 

fully comply with those instructions. Respondents shall accompany payment of the CMP 

Obligation with a cover letter that identifies the Respondents and the name and docket 

number of this proceeding. Respondents shall simultaneously transmit copies of the 

cover letter and the form of payment to the Chief Financial Officer, Commodity Futures 

Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 

20581. 

13 
C. Webb is prohibited from, directly or indirectly, engaging in trading on or subject to the 

rules of any registered entity ( as that term is defined in Section 1 a( 40) of the Act, 7 

U.S.C. § la(40) (2012)), until January 3, 2022, and all registered entities shall refuse him 

trading privileges during that period; and 

D. Classic and Webb shall comply with the following conditions and undertakings set forth 

in the Off er: 

1. Public Statements: Respondents agree that neither they nor any of their 

successors, assigns, agents or employees under their authority or control 

shall take any action or make any public statement denying, directly or 

indirectly, any findings or conclusions in this Order, or creating, or 

tending to create, the impression that this Order is without a factual basis; 

provided, however, that nothing in this provision shall affect Respondents' 

(i) testimonial obligations, or (ii) right to take legal positions in other 

proceedings to which the Commission is not a party. Respondents and 

their successors and assigns shall undertake all steps necessary to ensure 

that all of their agents and/or employees under their authority or control 

understand and comply with this agreement. 

2. Webb agrees that he shall not, directly or indirectly, until January 3, 2022: 

a. enter into any transactions involving "commodity interests" (as that term 

is defined in Regulation 1.3, 17 C.F.R. § 1.3 (2019)), for Webb's own 

personal account or for any account in which Webb has a direct or indirect 

interest; 

b. have any commodity interests traded on Webb's behalf; 

c. control or direct the trading for or on behalf of any other person or entity, 

whether by power of attorney or otherwise, in any account involving 

commodity interests; 

d. solicit, receive, or accept any funds from any person for the purpose of 

purchasing or selling any commodity interests; 

e. apply for registration or claim exemption from registration with the 

Commission in any capacity, and engage in any activity requiring such 

registration or exemption from registration with the Commission except as 

provided for in Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9) (2019); 

and/or 

f. act as a principal (as that term is defined in Regulation 3.l(a), 17 C.F.R. 

§ 3.l(a) (2019)) (for any person other than Classic), or as an agent or any 

other officer or employee of any person ( as that term is defined in Section 

la(38) of the Act, 7 U.S.C. § la(38) (2012)), registered, required to be 

registered, or exempted from registration with the Commission except as 

provided for in Regulation 4.14(a)(9). 

14 
3. Disgorgement: Webb agrees to pay disgorgement in the amount of 

$413,065 (the "Disgorgement Obligation"), plus post-judgment interest, 

which consists of ill-gotten trading profits Webb generated in his 

proprietary trading account through the fraudulent conduct described 

above. However, the Disgorgement Obligation shall be reduced by any 

amount Webb has actually paid to ICE under the settlement agreement 

between ICE and Webb announced on December 14, 2016. Webb shall 

pay the Disgorgement Obligation in the manner specified in Part VI.B of 

this Order. 

4. Cooperation, in General: Classic and Webb shall cooperate fully and 

expeditiously with the Commission, including the Commission's Division 

of Enforcement, in this action, and in any current or future Commission 

investigation or action related thereto. 

5. Partial Satisfaction: Classic and Webb understand and agree that any 

acceptance by the Commission of any partial payment of the 

Disgorgement Obligation or CMP Obligation shall not be deemed a 

waiver of their obligation to make further payments pursuant to this Order, 

or a waiver of the Commission's right to seek to compel payment of any 

remaining balance. 

6. Change of Address/Phone: Until such time as Webb satisfies in full his 

Disgorgement Obligation and Classic and/or Webb satisfy in full their 

CMP Obligation as set forth in this Order, Classic and Webb shall provide 

written notice to the Commission by certified mail of any change to their 

telephone number and mailing address within ten calendar days of the 

change 

The provisions of this Order shall be effective on this date. 

Dated: September 30, 2019 

15 

By the Commission 

cllJ, IL } .5M£2 

Christopher J. irkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission