Investing.com -- The U.S. Commodities and Futures Trade Commission (CFTC) announced on Wednesday that it is filing a civil lawsuit against Kraft Foods Group (NASDAQ:KRFT) and its spin-off Mondelez International for alleged manipulation of the wheat futures and wheat spot markets.
In response to rising wheat prices in September 2011, the CFTC alleges that Kraft and Mondelez developed and executed a strategy to buy a six-month supply of wheat for $90 million in futures. The company, according to the CFTC, had no intention to take delivery of the physical commodity. Kraft and Mondelez instead allegedly executed the strategy with the expectation that its long position would lower wheat prices on the spot market and widen the spread between December, 2011 wheat with March, 2012 wheat futures.
The company allegedly made a profit of more than $5 million on the strategic move, the CFTC said in a statement.
“This case goes to the core of the CFTC’s mission: protecting market participants and the public from manipulation and abusive practices that undermine the integrity of the derivatives markets," CFTC Director of Enforcement Aitan Goelman said in a statement. "A market participant who is not happy with cash prices available to it may not resort to manipulative trading strategies in an attempt to artificially lower that price.”
In addition, on five separate days in December, 2011, the company held long positions that exceeded the Chicago Board of Trade's spot-month position limit on wheat, according to the CFTC. At one point, the company exceeded the limit of 600 contracts by more than 2,100, the CFTC said in a statement.
Shares in Kraft Foods Group fell by 0.33% in after-hours trading to 90.40. Earlier on Wednesday, shares rose 3.58 or 4.12% to 90.70.