An epic 1950s market manipulation scam made two CME traders rich, farmers broke, and onion futures banned in the United States. This is the story of the Onion Futures Act:pic.twitter.com/xkzsF6gdJ0
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As supply dried up, onion prices soared. By the end of 1955, Siegel & Kosuga flipped to shorting onion futures & started loosening their massive supply on the market. Onion prices dropped from $2.75 per 50lb bag to under 10 cents by March 1956. The traders minted millions.
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Problem was, Siegel and Kosuga had counterparties that were getting crushed - America's farmers. Agriculture groups lobbied Congress, and then Representative Gerald Ford sponsored a bill to ban onion futures trading. Eisenhower signed it into law in 1958.pic.twitter.com/3RnW3GWo1g
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The effect on CME was immediate. 20% of its business had been outlawed overnight. The exchange sued to block passage of the bill, but lost in court. CME would shrink to record low profits in the years that followed. Onion futures are still banned to this day.
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