In the late 80s, the Chicago trading community was rocked by news of a widespread FBI sting operation in the pits of the CME and CBOT. This is the story of Operation Sourmash and Operation Hedgeclipper:
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Over the next 3 years, the agents live the pit trader life - expensive apartments, cars, jewelry and parties to cozy up to suspected criminals. To blend in, the agents try their hand at futures trading. Most lose money in the pits, including during the crash of October '87.pic.twitter.com/DeUY1iJbLo
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While undercover, the FBI discovers illegal activity. CME and CBOT traders would rig trades, sending fake receipts to the customer and pocketing money in their personal account. They would also front run & scalp customers for their own benefit.
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In early 1989, the press gets wind of the investigation, and the FBI runs out of time. Using evidence gathered from wires worn on the floor, they indict 46 traders on 1,500 counts of racketeering, fraud, and lying to the Feds.pic.twitter.com/k66O0OsQH1
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Takeaways: 1 - Someone is ALWAYS listening & watching. No one - not even the exchanges - knew about the FBI operation for years. 2 - The FBI are terrible traders, but very good at catching criminals!
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Sources: https://www.deseret.com/1989/8/3/18818033/46-traders-indicted-in-luxurious-sting-by-fbi-in-chicago … https://www.chicagotribune.com/news/ct-xpm-1989-01-20-8902270047-story.html …https://www.nytimes.com/1989/01/30/business/fbi-commodities-sting-fast-money-secret-lives.html …
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