UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

In the Matter of: 

SUMMERHAVEN INVESTMENT 

MANAGEMENT LLC, 

Respondent.

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CFTC Docket No. 21-07

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 in or about June 2018 to in or about July 2018 (“Relevant Period”), SummerHaven 

Investment Management LLC (“SummerHaven”) violated Section 4c(a)(l) and (2)(A) of the 

Commodity Exchange Act (the “Act”), 7 U.S.C. § 6c(a)(l)-(2)(A) (2018), and Commission 

Regulations (“Regulations”) 1.38(a) and 166.3, 17 C.F.R. §§ l .38(a), 166.3 (2020). Therefore, 

the Commission deems it appropriate and in the public interest that public administrative 

proceedings be, and hereby are, instituted to determine whether SummerHaven 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, SummerHaven has 

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, SummerHaven consents 

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 

acknowledges service of this Order.1

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 SummerHaven consents 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. 

SummerHaven does not consent, however, to the use of this Order, or the findings or conclusions herein, as the sole 

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. SummerHaven 

does 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.
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II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

In July 2018, SummerHaven engaged in wash sales in violation of Section 4c(a)(1) and 

(2)(A) of the Act, 7 U.S.C. § 6c(a)(1)-(2)(A) (2018). SummerHaven entered bids and offers for 

the same quantities of the same futures contracts for trading accounts that had the same 

beneficial owner and which were intended to and did in fact offset each other upon execution. 

By intentionally entering these offsetting orders in this manner and achieving the goal of having 

these bids and offers offset each other upon execution, SummerHaven negated the risk or price 

competition incidental to an open and competitive marketplace and thus engaged in 

noncompetitive transactions in violation of Regulation 1.38(a), 17 C.F.R. § 1.38(a) (2018). 

During the Relevant Period, SummerHaven, a registered commodity trading advisor 

(“CTA”) and commodity pool operator (“CPO”), also failed to supervise its activities in violation 

of Regulation 166.3, 17 C.F.R. § 166.3 (2018). SummerHaven’s supervision failures resulted in 

the aforementioned wash sales. 

B. RESPONDENT 

SummerHaven is a Delaware limited liability company with its principal place of 

business in Stamford, Connecticut. SummerHaven is a commodity-focused asset management 

firm and has been registered with the Commission as a CTA and CPO since October 9, 2009. 

C. FACTS 

During the Relevant Period, SummerHaven managed a commodity futures portfolio for a 

third party, Entity A. In or around June 2018, SummerHaven decided to move certain of Entity 

A’s commodity futures positions from one futures commission merchant (“FCM 1”) to another 

(“FCM 2”). SummerHaven employees and partners discussed two methods of transferring the 

positions from FCM 1 to FCM 2: (1) moving the positions via a back-office transfer managed by 

both FCMs in accordance with the rules of the designated contract market, in what is commonly 

known as an “ex-pit” transfer, see, e.g., CME Rule 853; or (2) placing offsetting orders at both 

FCMs that would allow SummerHaven to close the positions at FCM 1 and reestablish the same 

positions at FCM 2. Individual A, who was then SummerHaven’s Managing Partner and Head 

of Trading, preferred not to ex-pit the positions, purportedly out of concern that the FCMs might 

make an error in executing the transfer. Individual A instead decided that SummerHaven should 

move the positions by placing offsetting orders at both FCMs, waiting approximately thirty 

seconds between the placement of each offsetting order. Individual B, who at that time was a 

SummerHaven partner and SummerHaven’s Chief Compliance Officer, approved the decision, 

and told SummerHaven employees that the transactions were not improper because they were 

exposed to market risk for a short period of time. 

At the direction of Individual A, over the course of several hours on July 2, 2018, two 

SummerHaven traders placed more than one hundred orders to sell futures in accounts at FCM 1 
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and buy the same futures in accounts at FCM 2, or vice versa. The traders followed Individual 

A’s instruction to wait 30 seconds between the placement of an order at one FCM and the 

corresponding order at the other FCM, and executed offsetting trades in 11 different markets, 

sequentially placing orders on a contract-by-contract basis (i.e., executing offsetting orders in 

one futures contract before moving onto the next futures contract). The traders took steps to 

minimize exposure to market risk, placing orders at times when there was less trading activity in 

a contract or the bid-ask spread was wider, and avoiding placing orders around the time that 

reports or other news might come out that could increase activity or volatility in a specific 

contract. 

Some of the orders were executed within seconds, while others rested on the order book 

for longer. Ultimately, SummerHaven executed pre-arranged trades in WTI Crude Oil (“CL”), 

Gold (“GC”), Heating Oil (“HO”), Live Cattle (“LE”), Lean Hogs (“HE”), Soybean Meal 

(“ZM”), Gasoline (“RB”) Cocoa (“CC”), Cotton No. 2 (“CT”), Brent Crude Oil (“B”), and Low 

Sulphur Gasoil (“G”). In total, SummerHaven’s wash sales accounted for more than 11,000 

contracts—723 lots of CL, 314 lots of GC, 517 lots of HO, 842 lots of LE, 1,851 lots of HE, 

1,303 lots of ZM, 582 lots of RB, 1,932 lots of CC, 1,080 lots of CT, 1,784 lots of B, and 640 

lots of G. Each of these transactions produced a wash result, meaning that the transaction was at 

the same or similar price and for accounts with the same beneficial ownership. 

The aggregate value of the contracts traded through these pre-arranged transactions 

exceeded $570 million. For several instruments, the pre-arranged trades accounted for a 

majority of the contracts traded on July 2, 2018. 

Although SummerHaven had compliance policies and procedures in place, and required 

employees to complete quarterly compliance certifications, those policies and procedures did not 

prohibit or otherwise address wash sales. In addition, SummerHaven did not have in place any 

programs or protocols to detect or prevent wash sales from occurring. Moreover, persons with 

supervisory authority and compliance responsibilities actually authorized the unlawful trades in 

dereliction of supervisory duties. 

III. LEGAL DISCUSSION 

A. SummerHaven Entered into Wash Sales in Violation of Section 4c(a)(1) and (2)(A) 

of the Act 

Section 4c(a)(1) and (2)(A) of the Act, 7 U.S.C. § 6c(a)(1)-(2)(A) (2018), in part, makes 

it “unlawful for any person to offer to enter into, enter into, or confirm the execution of a 

transaction” that “is of the character of, or is commonly known to the trade as, a ‘wash sale.’” A 

wash sale is a form of fictitious sale. In re Gimbel, CFTC No. 84-40, 1988 WL 232267, at *1 

(Apr. 14, 1988), aff’d as to liability sub nom. Gimbel v. CFTC, 872 F.2d 196 (7th Cir. 1989). 

“[T]he Commission also remains of the view that transactions initiated with an intent to avoid 

bona fide trading transactions that result in a ‘wash’ of the constituent positions are wash sales 

under Section 4c(a)(A) without regard to the motivation for the particular transaction.” Id. at *4 

n.6. 
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To establish that a wash sale has occurred, the Commission must initially demonstrate 

that the transaction at issue achieved a wash result. The Commission may demonstrate that the 

trades resulted in a wash by showing: “(1) the purchase and sale (2) of the same delivery month 

of the same futures contract (3) at the same (or a similar) price.” Wilson v. CFTC, 322 F.3d 555, 

559 (8th Cir. 2003) (citing In re Gilchrist, CFTC No. 83-58, 1991 WL 83518, at *9 (Jan. 25, 

1991)). 

In addition to the factors enumerated in Gilchrist, intent must be proven to establish a 

violation of Section 4c of the Act. See, e.g., Reddy v. CFTC, 191 F.3d 109, 119 (2d Cir. 1999). 

The intent to negate risk or price competition and avoid a bona fide market position can be 

inferred from prearrangement, or “from the intentional structuring of a transaction in a manner to 

achieve the same result as prearrangement.” In re Three Eight Corp., CFTC No. 88-33, 1993 

WL 212489, at *7 n.15 (Jun. 16, 1993) (citing In re Collins, CFTC No. 77-15, 1986 WL 66165, 

at *5 (Apr. 4, 1986), rev’d on other grounds sub nom. Stoller v. CFTC, 834 F.2d 262 (2d Cir. 

1987)). The placement of offsetting orders to buy and sell, while simultaneously taking steps to 

“enhance the likelihood that the buy and sell orders would be filled at the same or a similar 

price” is persuasive evidence that the trader intends to negate risk and price competition. 

Collins, 1986 WL 66165, at *5; see also In re Piasio, CFTC No. 97-9, 2000 WL 1466069, at * 

10 (Sept. 29, 2000) (finding customer who placed paired buy and sell orders, with specific 

pricing and loss limitation instructions, “structured its orders to negate risk” and thus had intent 

to violate Section 4c), aff'd sub nom. Piasio v. CFTC, 54 Fed. App’x 702 (2d Cir. 2002). 

SummerHaven entered offsetting orders for the purchase and sale of the same delivery 

month of the same futures contract at the same price, and those orders traded and achieved wash 

results. Additionally, SummerHaven knowingly entered into the purchase and sale of these 

futures contracts for the purpose of negating market risk, and it structured and timed offsetting 

orders to enhance the likelihood that those orders would match with each other or be filled at the 

same or similar price. In doing so, SummerHaven violated Section 4c(a)(1) and (2)(A) of the 

Act by entering into transactions of the character of, and commonly known as, wash sales. 

B. SummerHaven Executed Noncompetitive Trades in Violation of Commission 

Regulation 1.38(a) 

Regulation 1.38(a), 17 C.F.R. § 1.38(a) (2020), requires that all purchases and sales of 

commodity futures be executed “openly and competitively.” The purpose of this requirement is 

to ensure that all trades are executed at competitive prices and that all trades are directed into a 

centralized marketplace to participate in the competitive determination of the price of futures 

contracts. Noncompetitive trades are also a type of fictitious sale because they negate the risk 

incidental to an open and competitive market. In re Fisher, CFTC No. 93-2, 2004 WL 584216, 

at *3 n.11 (Mar. 24, 2004); see also In re Copersucar Trading A.V.V., CFTC No. 17-22, 2017 

WL 3588915, at *3-4 (Aug. 15, 2017) (consent order) (structuring and transferring positions 

between proprietary accounts constituted violations of Regulation 1.38 (a)). 

SummerHaven entered offsetting orders with the intent that they would offset, and timed 

and structured those orders to minimize market competition. SummerHaven also knew that the 

trades were not subject to competitive market forces because it knew that the orders would trade 

with others that SummerHaven had already submitted. The executions of these orders were not 
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open and competitive, and because SummerHaven engaged in noncompetitive trades, it violated 

Regulation 1.38(a). 

C. SummerHaven’s Supervision Failures Violated Regulation 166.3 

Regulation 166.3, 17 C.F.R. § 166.3 (2020), requires that every Commission registrant 

“diligently supervise the handling by its partners, officers, employees, and agents of all 

commodity interest accounts carried, operated, advised or introduced by the registrant.” 

Regulation 166.3 imposes upon a registrant an affirmative duty to supervise its employees and 

agents diligently by establishing, implementing, and executing an adequate supervisory structure 

and compliance program. CFTC v. Carnegie Trading Grp., Ltd., 450 F. Supp. 2d 788, 805 (N.D. 

Ohio 2006); see also Adoption of Customer Protection Rules, 43 Fed. Reg. 31,886, 31,889 (July 

24, 1978) (codified at 17 C.F.R. pts. 1 and 166). 

A violation of Regulation 166.3 is an independent violation for which no underlying 

violation is necessary. In re GNP Commodities, Inc., CFTC No. 89-1, 1992 WL 201158, at *17 

n. 11 (Aug. 11, 1992), aff'd in part and modified sub nom; Monieson v. CFTC, 996 F.2d 852 (7th 

Cir. 1993); In re Paragon Futures Ass’n, CFTC No. 88-18, 1992 WL 74261, at *13 (Apr. 1, 

1992). However, evidence of underlying violations that “should be detected by a diligent system 

of supervision . . . because of the nature of the violations” is probative of a failure to diligently 

supervise. CFTC v. Sidoti, 178 F.3d 1132, 1137 (11th Cir. 1999). 

For a registrant to fulfill its duties under Regulation 166.3, it must both design an 

adequate program of supervision and ensure that the program is followed. See, e.g., GNP 

Commodities, Inc., 1992 WL 201158, at *19. 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 FCStone, LLC, CFTC 

No. 15-21, 2015 WL 2066891, at *3 (May 1, 2015) (consent order) (citing In re Murlas 

Commodities, Inc., CFTC No. 85-29, 1995 WL 523563, at *9 (Sept. 1, 1995) (noting Regulation 

166.3 can be violated with an inadequate system); GNP Commodities, Inc., 1992 WL 201158, at 

19 (noting Regulation 166.3 can be violated if the adequate system is not diligently 

administered)). “The focus of any proceeding to determine whether Rule 166.3 has been 

violated will be on whether [a] review [has] occurred and, if it did, whether it was ‘diligent.’” 

Paragon, 1992 WL 74261, at *14. 

SummerHaven violated Regulation 166.3 in two ways, both employing an inadequate 

supervisory system and failing to perform its supervisory duties diligently. 

First, SummerHaven failed to design an adequate supervisory system with respect to 

wash sales. Although SummerHaven had compliance policies and procedures in place, and 

required employees to complete quarterly compliance certifications, those policies and 

procedures did not prohibit or otherwise address wash sales. In addition, SummerHaven did not 

have in place any programs or protocols to detect or prevent wash sales from occurring. 

Second, SummerHaven failed to perform its supervisory duties diligently. The decision 

to transfer positions through wash sales was brought to the attention of, reviewed by, and 

directed by senior supervisory management, including SummerHaven’s then-CCO and then-
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Managing Partner. By failing to recognize that these trades constituted illegal wash sales, and 

failing to prevent them from occurring, SummerHaven failed to conduct a diligent review of the 

trades and thus failed to diligently supervise the handling of its commodity interest accounts. 

IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that, during the Relevant Period, 

SummerHaven violated Section 4c(a)(l) and (2)(A) of the Act, 7 U.S.C. § 6c(a)(l)-(2)(A) (2018), 

and Regulations 1.38(a) and 166.3, 17 C.F.R. §§ l .38(a), 166.3 (2020). 

V. OFFER OF SETTLEMENT 

SummerHaven has submitted the Offer in which it, without admitting or denying the 

findings and conclusions herein: 

A. Acknowledges service of this Order; 

B. Admits the jurisdiction of the Commission with respect to all 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. Waives: 

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

2. A hearing; 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. 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 it may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504 (2018), and 28 U.S.C. § 2412 (2018), and/or the rules promulgated 

by the Commission in conformity therewith, Part 148 of the Regulations, 17 

C.F.R. pt. 148 (2020), relating to, or arising from, this proceeding; 

7. Any and all claims that it 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 on 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; 
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D. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which SummerHaven has consented in the Offer; and 

E. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

1. Makes findings by the Commission that SummerHaven violated Section 4c(a)(l) 

and (2)(A) of the Act, 7 U.S.C. § 6c(a)(l)-(2)(A) (2018), and Regulations 1.38(a) 

and 166.3, 17 C.F.R. §§ l .38(a), 166.3 (2020); 

2. Orders SummerHaven to cease and desist from violating Section 4c(a)(l) and 

(2)(A) of the Act and Regulations 1.38(a) and 166.3; 

3. Orders SummerHaven to pay a civil monetary penalty in the amount of Five 

Hundred Thousand Dollars ($500,000.00), plus post-judgment interest, according 

to the terms set forth below; and 

4. Orders SummerHaven and its successors and assigns to comply with the 

conditions and undertakings consented to in the Offer and as set forth in Part VI 

of this Order. 

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

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. SummerHaven and its successors and assigns shall cease and desist from violating 

Section 4c(a)(l) and (2)(A) of the Act, 7 U.S.C. § 6c(a)(l)-(2)(A) (2018), and Regulations 

1.38(a) and 166.3, 17 C.F.R. §§ l .38(a), 166.3 (2020). 

B. SummerHaven shall pay a civil monetary penalty in the amount of Five Hundred 

Thousand Dollars ($500,000.00) (“CMP Obligation”), plus any post-judgment interest. 

SummerHaven shall satisfy the CMP Obligation by making payments as follows: 

a. $100,000 to be paid within 10 days of entry of this Order; 

b. $200,000 to be paid within 12 months of the date of entry of this Order; and 

c. $200,000 to be paid within 24 months of the date of entry of this Order. 

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 (2018). Post-judgment interest 

will be waived for any amounts paid in compliance with the above deadline. 

Payments shall be deemed made on the date they are received by the Commission. If any 

payment is not made by the date the payment is required by this Order, the entire 
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outstanding balance of the CMP Obligation, plus any post-judgment interest, shall be due 

and payable immediately. 

SummerHaven 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, SummerHaven shall contact Marie 

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

fully comply with those instructions. SummerHaven shall accompany payment of the 

CMP Obligation with a cover letter that identifies the paying Respondent and the name 

and docket number of this proceeding. SummerHaven 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, 

N.W., Washington, D.C. 20581. 

C. SummerHaven and its successors and assigns shall comply with the following conditions 

and undertakings set forth in the Offer: 

1. Public Statements: SummerHaven agrees that neither it nor any of its successors 

and assigns, agents or employees under its 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 SummerHaven’s: (i) testimonial obligations; or (ii) right to 

take legal positions in other proceedings to which the Commission is not a party. 

SummerHaven and its successors and assigns shall comply with this agreement, 

and shall undertake all steps necessary to ensure that all of its agents and/or 

employees under its authority or control understand and comply with this 

agreement. 

2. Partial Satisfaction: SummerHaven understands and agrees that any acceptance 

by the Commission of any partial payment of SummerHaven’s CMP Obligation 

shall not be deemed a waiver of its obligation to make further payments pursuant 
3. 

to this Order, or a waiver of the Commission's right to seek to compel payment of 

any remaining balance. 

Change of Address/Phone: Until such time as SummerHaven satisfies in full its 

CMP Obligation as set forth in this Order, SummerHaven shall provide written 

notice to the Commission by certified mail of any change to its telephone number 

and mailing address within ten calendar days of the change. 

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

By the Commission. 

C1bJA.t~-

Christopher J. Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: May 18, 2021 

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