A Washington state rancher has pleaded guilty to wire fraud and faces up to 20 years in prison for a scam involving the buying and feeding of hundreds of thousands of cattle that didn’t exist.

The US Commodity Futures Trading Commission (CFTC) filed a civil enforcement action on Wednesday, charging Easterday Ranches Inc, and co-owner Cody Easterday, in connection with the sale of more than 200,000 non-existent head of cattle to a beef processor.

The defence contended that Easterday started trading on the commodities market as a hedge against losses inherent in the cycle of agriculture markets and became addicted.

Easterday pleaded guilty and is scheduled to be sentenced on 4 August, promising to pay $244m in restitution.

The scheme

Easterday accumulated more than $200m in losses over a 10-year period from speculative trading in the cattle futures markets.

A commodity futures contract is an agreement to buy or sell a predetermined amount of a commodity at a specific price on a specific date in the future.

Live cattle futures are widely traded commodities futures contracts, referring to cattle that have reached the required weight for slaughter.

To meet margin calls, Easterday devised a scheme to defraud one of his biggest business partners, the South Dakota-based beef producer Tyson Foods.

Tyson Foods alleges that: “From October 2016 to November 2020, Easterday caused Easterday Ranches to submit false invoices and reimbursement requests relating to more than 200,000 head of cattle that Easterday Ranches never actually purchased or raised on the producer’s behalf.

“Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received from the producer more than $233m.”