Dan Shak, the poker player, hedge fund manager and commodities trader, is facing a lifetime trading ban from the commodities regulator (CTFC). Shak, 55, from Las Vegas, landed himself in hot water after ignoring a previous ban imposed by the CTFC for attempting to manipulate the price of WTI crude oil futures.
In November, Shak and his company SHK Management were fined $400,000 and permanently barred from trading in the crude markets as a result, and also prohibited from trading “outright futures.”
Also called “naked futures,” these are long or short trades on an underlying futures contract which has a chance of unlimited profit, but also has a risk of unlimited losses. This kind of trading leaves the investor highly exposed, and it’s landed Shak in hot water.
The CFTC filed a civil enforcement complaint against Shak this week, stating that he traded two outrights in June of this year and one on May 22, during the market close; “the exact type of commodity futures trading that he agreed to be banned from trading,” it said.
“Unless restrained and enjoined by this court,” concluded the CTFC, “Shak is likely to continue to engage in the acts and practices.”
The regulator also said that Shak’s futures commission broker confronted him about the illegal trades and reported the incident to the regulatory body.
According to Shak’s lawyer, however, the charges are overblown and the threat of a lifetime ban is “draconian.”
“It’s shocking that the CFTC will devote this kind of resources at such a minor technical infraction. We also dispute the CFTC’s allegation that he did not disclose the violation to the CFTC,” David Kovel, attorney at law firm Kirby Mclnerney LLP, told Reuters. “If they’re trying to protect the market, they’re looking in the wrong place. It was a minor, minor, minor infraction. Yet they are treating him like a criminal.”
Shak formed SHK Asset Management in 2002 and caused a stir in early 2011, when SHK liquidated a gold trade spread trade, according to Reuters, that had a notional value of around $850 million, causing tremors in the gold market. Open interest in US gold futures fell the lowest on record as Shak closed out positions equivalent to one tenth of the market.
As a poker player, Shak has $7.3 million in tournament winnings, his biggest ever score being at the Aussie Millions, where he picked up $1,107,553 in the $100,000 High Roller event in 2010. He was married to the model and poker player Beth Shak, whom he divorced in 2009. In 2012, he attempted to sue Beth for her shoe collection of approximately 1,200 pairs, which was worth $1 million. He later dropped the case.