CHS Hedging — a Minnesota-based futures commission merchant and affiliate of CHS, Inc., an agribusiness owned by farmers, ranchers, and cooperatives across the United States — achieved a full defense ruling in arbitration proceedings before the National Futures Association (NFA).
The claimant was the bankruptcy trustee of H&I Grain elevators in eastern South Dakota, which lied to farmers as well as the State of South Dakota, leaving some 60 farmers with losses of an estimated $5 million. The owners of H&I Grain opened a commodity futures trading account with our client to hedge their product positions. Over the course of five years, they lost more than $8 million dollars on the market. When they could not meet their margin call with CHS Hedging, they failed to let the farmers or the South Dakota Public Utilities Commission know and still continued to accept grain from farmers. This resulted in criminal charges and jail sentences.
When H&I Grain became insolvent, it left huge unpaid debts to our client, to its bank, and to many farmers. The bank paid for the trustee to hire a lawyer to try to recover money from our client. In other words, even though the bank and our client were both the victims of H&I Grain’s misconduct, the bank decided to take a chance on mitigating its losses by further victimizing our client.
This matter had a very complex factual and procedural history, including advocacy by our firm in front of South Dakota state court, the South Dakota Public Utilities Commission, and the U.S. District Court for the District of South Dakota—all in addition to the arbitration proceedings before the NFA.