Commodities Probe Hits Markets in N.Y.

NEW YORK — Federal agents swooped down on the floors of the New York Commodities Exchange and the New York Mercantile Exchange today. At least four traders were escorted off the floor and others were subpoenaed as part of a criminal investigation of the markets, officials said.

The U.S. Postal Service confirmed it was executing a criminal search warrant at an office in a World Trade Center building where the commodities exchange is based.

John Slavinski, head of the New York office of the U.S. Postal Inspection Service, said inspectors were executing two search warrants for documents at the Comex and the Merc.

Investigation Confirmed

“A criminal investigation is under way, and I’m not allowed to comment further on it,” he said.

The raid came during a federal investigation of alleged widespread illegal trading activity at Chicago’s two futures exchanges, which are the nation’s largest.

Market sources who asked not to be named said three silver traders were taken from the Comex pits while at least one trader was taken from the floor of the New York Merc.

Comex spokesman Robert McGrath said subpoenas were being issued to an unspecified number of commodities and oil traders who belong to the Commodities Exchange Center, where the five New York futures exchanges are based.

“We have been asked to assist and cooperate with the CFTC, which we are doing,” McGrath said. “We also understand that the exchange itself along with other exchanges will be receiving a subpoena, which obviously we will be immediately responsive to.”

It was not immediately clear whether any traders were arrested or what information was being sought. The Commodity Futures Trading Commission is an independent federal agency charged with regulating the nation’s commodities markets.

Robert Mignogna, a mail fraud section team leader for the Postal Service in New York, said a criminal search warrant had been executed at a World Trade Center office but said no arrest warrant had been issued.

Allegations of widespread fraud and cheating of customers at the Chicago futures markets surfaced in January after disclosure of a two-year federal undercover investigation at the Chicago Board of Trade and Chicago Mercantile Exchange.

Futures are agreements to buy or sell a commodity, such as wheat, frozen orange juice or Treasury bills, at a specified future date for a specified price. Investors use the futures markets to speculate on price movements.

The federal probe of the Chicago markets concerns allegations that as many as 100 brokers at the two exchanges systematically cheated investors out of millions of dollars through illegal trading practices.