Futures & Commodities

Former Nymex Director Slapped with Prison Time

CNBC.com with Wires

A floor trader who served on the board of the New York Mercantile Exchange agreed to serve five months in prison Tuesday after pleading guilty to fraud and evidence tampering related to commodities trading.

Ex-Nymex Director Pleads Guilty

In addition to Steven Karvellas, the former Nymex director, three other commodities traders have pleaded guilty, the Manhattan District Attorney's Office said in a news release.

Three more people have been arrested and their cases are pending, the office said.

Karvellas entered his plea in New York State Supreme Court.

He also agreed to pay $850,000 in fines and penalties.

He made no statement at the hearing or outside the courtroom.

Karvellas served as a member of the Nymex board from 1996 to 2006, and from 1998 to 2002 was on the board of directors' executive committee.

According to a court document, the fraud involving Karvellas occurred between 2002 and 2003.

He admitted that he engaged in fraud by delaying the allocation of customer orders to buy or sell natural gas contracts in order to wait to see what direction the market was moving.

In several instances, according to the court document, when the market price moved in a direction that made the order immediately profitable, Karvellas would then allocate the contracts to himself rather than allocating them to the customer.

Other Charges

In total, seven people were charged in the probe of illegal trading at the Nymex.

Three other people already have pleaded guilty for participating in fraudulent commodities trading; another three have been arrested and their cases are pending.

Manhattan District Attorney Robert Morgenthau and the head of the Commodity Futures Trading Commission planned a news conference to discuss details of the case.

The illegal activity occurred between September 2002 and May 2003.