Former natural gas trader pleads guilty for role in commodities insider trading scheme

HOUSTON – A former natural gas trader pleaded guilty today to conspiracy to commit commodities fraud and wire fraud for his role in an insider trading scheme.

John Ed James, 51, Katy, pleaded guilty to one count of conspiracy to commit commodities fraud and wire fraud before U.S. District Judge Vanessa Gilmore. Sentencing has been scheduled for April 26.  

“That executives continue to use inside nonpublic information for their own gain, illustrates that prosecutors must investigate and pursue these cases,” said U.S. Attorney Ryan K. Patrick. “These conspirators cooked the books and shared the loot - plain and simple.”

“When individuals engage in deceptive trade practices and manipulate the commodities market for their personal gain, they undermine the public’s confidence in the U.S. markets and stack the deck against other traders and investors,” said Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division. “The department and our law enforcement partners will continue to pursue and prosecute those who engage in such activity.”

“Commodities fraud and insider trading undermine the integrity of the markets, in this case the energy market which plays a key role in the Houston area economy,” said Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office. “The FBI will continue to combat criminal violations of the commodities laws to eliminate unscrupulous activity and protect market participants so that the public will continue to have trust in the system.”

As part of his guilty plea, James admitted he conspired with others to misappropriate material, nonpublic information and to use that information to engage in fraudulent, pre-arranged trades in natural gas futures contracts. These pre-arranged trades generated approximately $966,403 in illicit proceeds. He further admitted the net profits from these fraudulent trades were split between himself and others involved in the fraudulent trading scheme. James also admitted he and others agreed to falsely document certain proceeds as income on IRS forms in part to conceal the true nature of the funds and to make the illicit profits appear to be legitimate income paid. 

In a related case, Marcus Schultz, 41, previously pleaded guilty before Judge Gilmore July 20, 2020, to a one-count information charging him with conspiracy to commit wire fraud and to violate various provisions of the Commodity Exchange Act including 17 C.F.R. § 180.1. Sentencing is scheduled for June 14.

This matter marks the Department of Justice’s first effort to prosecute insider trading in the commodity markets under Section 180.1.     

The FBI’s Houston Field Office and IRS-Criminal Investigation’s Houston Field Office conducted the investigation. Assistant U.S. Attorney Suzanne Elmilady is prosecuting the case along with Trial Attorneys Jennifer Farer, Drew Bradylyons and Della Sentilles of the Criminal Division’s Fraud Section.

The Criminal Division’s Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country and is the national leader in prosecuting fraud and manipulation in the U.S. commodity markets.– A former natural gas trader pleaded guilty today to conspiracy to commit commodities fraud and wire fraud for his role in an insider trading scheme.