The FBI used a mink net to drag in some of the flashiest fish at the world's two largest commodities exchanges - The Chicago Board of Trade and the Chicago Mercantile Exchange.
The catch includes 46 traders indicted on 1,500 counts ranging from racketeering and fraud to lying to federal agents. The indictments were announced Wednesday by Attorney General Richard Thornburgh, and officials said there could be more.The defendants are accused of bilking hundreds of clients out of millions of dollars. Prosecutors refused to say exactly how much money was involved.
"The activities uncovered at these exchanges - the largest of their type in the world - cannot be tolerated," Thornburgh said.
"Those actions allegedly include creating and concealing fraudulent trades with other traders who served as `bagmen' and otherwise accommodated the illegal trades, often kicking back a percentage of the stolen customer monies into brokers' personal accounts," he said.
The 2 1/2-year investigation at the two exchanges - dubbed Operation Sourmash at the CBOT and Operation Hedgeclipper at the CME - probably were among the lushest FBI undercover sting operations.
The trappings included luxury apartments, exclusive clubs, fine jewelry, expensive cars and high-stakes action as freewheeling traders on the two exchanges.
"The FBI used extraordinary means to uncover extraordinary fraud," said FBI Director William Sessions, who appeared at the Chicago news conference with Thornburgh. "These practices must not and cannot be permitted to flourish."
Four FBI undercover agents were sent into the trading pits, living life in the fast lane and gathering evidence that traders were cheating customers.
Authorities have provided no specifics on what prompted the investigation, but it is widely believed it resulted from a complaint by Dwayne Andreas, chairman of Archer Daniels Midland, one of the world's biggest soybean and corn processing firms.
Andreas has complained more than once that speculators have turned the exchanges into gambling dens instead of legitimate instruments for locking in prices and currency exchange rates and guaranteeing adequate supplies of commodities.
The probe began in earnest in 1986 when agent Richard Ostrom, using the name Richard Carlson, began work as a phone clerk for ADM Inc., Archer Daniels Midlands' commodity trading subsidiary. He worked his way up to floor broker before buying his own seat on the CBOT for $335,000 in December 1987.
Ostrom rented a luxurious apartment on Chicago's Near North Side, wore a Rolex watch, drove a new Mercedes-Benz and - posing as a corrupt trader - partied with his trader buddies at expensive restaurants and exclusive clubs.
According to the indictments released Wednesday, Ostrom was recruited as a bagman in the soybean pit fraud scheme. He is said to have made $100,000 in his trading last year.