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Mondelez, Kraft To Pay $16M To Resolve Allegations Of Futures Market Manipulation

Food giants Mondelez International Inc (NASDAQ: MDLZ) and Kraft Food Groups will pay $16 million to settle allegations they created unfair advantages in wheat futures,

Benzinga · 03/06/2020 17:58

Food giants Mondelez International Inc (NASDAQ: MDLZ) and Kraft Food Groups will pay $16 million to settle allegations they created unfair advantages in wheat futures, The Wall Street Journal reported.

The Mondelez, Kraft Settlement 

Mondelez and Kraft were once part of a single corporate entity, and they and appear to be set on resolving a dispute with the Commodity Futures Trading Commission, the newspaper reported Thursday.

Kraft was accused of building a large position in wheat futures in 2015 when it had no intention of ever accepting physical delivery. Doing so would have driven down the spot-market price of wheat, which the food company would take advantage of for its business.

Kraft and Mondelez reached a 2019 settlement with the CFTC, but the companies cried foul when the regulatory body violated terms of the agreement by issuing public comments.

Specifically, the CFTC issued a press release, a statement by all commissioners and a separate statement signed by the two Democrats on the commission.

Judge Says Regulator Showed 'Egregious Misconduct' 

What's particularly odd about the legal fiasco is that the CFTC never explained how the food companies' trading strategies in the future markets violated the law, according to the WSJ.

Judge John Robert Blakey noted the CFTC's statements at the time represented "egregious misconduct" and the regulatory body could face consequences of its own.

Nevertheless, the food companies now appear to be willing to settle for the same $16-million fee but without any restrictions on what the CFTC can say about the outcome, sources told WSJ.

What's Next For Kraft, Mondelez 

Any settlement needs to be approved by a federal court in Chicago, according to WSJ.

Kraft shares were down 1.99% at $26.12 at the time of publication Friday, while Mondelez shares were down 2.53% at $55.42. 

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