When President Donald Trump backed away from threats to strike Iranian power plants on March 23, it sparked a frenzy of buying and selling across oil, equities and other markets.

Traders had grown accustomed to prices lurching wildly on developments in the Middle East. But this time, some bettors had timed it perfectly. Billions of dollars’ worth of contracts predicting oil would fall and the S&P 500 would rise were placed about 15 minutes before the president announced his U-turn in a post on Truth Social, fueling widespread speculation about whether someone had an unfair advantage.

Responsibility for looking into the incident fell to the U.S. Commodity Futures Trading Commission, the federal derivatives regulator whose remit — and profile — has soared with the advent of cryptocurrencies and prediction markets. There, a team of career forensic analysts embarked on their usual task of pulling together data on the day’s winners and losers.

Based on the timing of the trading they observed and who was behind it, the analysts, from the agency’s Division of Market Oversight, filed a referral to the Division of Enforcement, which would decide whether to launch a full-scale investigation into potential insider trading, according to people familiar with the matter who asked not to be identified discussing government deliberations. Representatives from the two divisions also met and talked through how best to collaborate, people familiar with the matter said.

What happened next, they said, was highly unusual: Mel Gunewardena, a senior adviser to the agency’s Trump-appointed chairman, Michael Selig, told a supervisor within the market oversight team to retract the referral.

The team didn’t know how to proceed, the people said. As a practical matter, it was unclear how they might even carry out such an action since it had rarely, if ever, been done before. It marked a break with precedent in another way as well. Career experts had always been entrusted with the specialized but prosaic task of gathering reams of data and writing preliminary reports that the attorneys in enforcement would then decide whether to pursue.

Now, according to the people, an adviser to political appointee Selig was intervening to scuttle the referral and oversee the gathering of data himself. Gunewardena, a Wall Street veteran who spent time at the CFTC during the first Trump administration, had rejoined the agency a few weeks before as head of the Office of International Affairs and Senior Markets Advisor to the chairman, and it wasn’t clear what role he had in the evidence-gathering process.

“In every previous administration I’m familiar with, that would not just have been unusual — but never done,” Aitan Goelman, who served as the agency’s Director of Enforcement from 2014 to February 2017, said when asked generally about such an intervention. “It makes it harder for the staff, if they know that any moment the rug can get pulled out from under them.” (Goelman has represented CME Group Inc. in a lawsuit against the CFTC.)

The traders flagged by the forensic analyst unit as warranting further investigation have not been publicly identified. The CFTC declined to comment, saying it can’t confirm or deny investigations. Gunewardena did not respond to a request for comment through the regulator’s press office.

An official at the agency said that, because the original findings were U.S.-focused, it was determined there should be a more comprehensive review of markets internationally, including futures, swaps, over-the-counter activity, options and exchange-traded funds. As a former Goldman Sachs Group Inc. and State Street Corp. executive — and the most senior official at the CFTC focused on market analysis and oversight — Gunewardena was best placed to lead that exercise, said the official, who declined to be named discussing internal agency decisions.

The CFTC’s enforcement division is continuing to probe the trading activity. The agency is looking at March and April with a particular focus on March 23, the official said.

The Justice Department has opened a parallel investigation, a person familiar with the matter said earlier this year, asking not to be identified due to its sensitivity. A department spokesperson last week declined to comment on the status of the probe.

U.S. Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, said later Tuesday that Selig and Gunewardena should answer to Congress about the status of the agency’s investigations and potential enforcement actions. “It is disturbing that a senior advisor to Chairman Selig may have intervened in efforts by agency career staff to do their jobs and investigate potentially billions of dollars worth of insider trading,” Warren said in a statement.

The trading in question was eye-popping. In a two-minute window starting at 6:49 a.m. in New York on March 23, traders sold contracts equivalent to at least 6 million barrels of Brent and West Texas Intermediate, more than 8.5 times the volume that had changed hands that time in the morning over the prior week. A similar increase in activity was observed in futures tied to the S&P 500, with contracts worth more than $2 billion in notional value traded — far more than would be expected in an otherwise quiet premarket session. Unusual volumes were also visible in natural gas and other futures markets.

Those trades paid off 15 minutes or so later, when Trump wrote on Truth Social that he was reversing his threat to attack Iranian infrastructure unless the country re-opened the Strait of Hormuz. Brent oil prices plunged as much as 14% after the post. U.S. crude plummeted in the double digits as well, while stock markets in the U.S. and Europe jumped about 4% from their session lows to intraday highs.

“The fact that this trading preceded a headline driven sell-off means that either someone got very lucky or knew something,” said Tim Skirrow, head of derivatives at Energy Aspects, adding that it wasn’t clear from the publicly available data which it might be.

As the Iran conflict deepened, examples multiplied of large, markedly well-timed trading in futures and prediction markets, including before Trump declared a cease-fire on April 7, and before Iranian Foreign Minister Abbas Araghchi announced 10 days later that Hormuz would reopen. The CFTC’s forensic analyst group continued compiling and parsing the data, but after Gunewardena’s intervention, they were no longer consulted by the rest of the agency, according to the people familiar.

Gunewardena assembled his own team to conduct a new analysis of the trading. By July, the supervisor Gunewardena had told to retract the referral had left the agency. Other members of the team resigned or were moved to other roles, including some under Gunewardena. It’s not clear if the personnel changes were related to the episode.

Since Trump returned to the White House in January 2025, the CFTC has shed more than 20% of its staff, part of a wide-reaching shrinkage of the government. Selig took the agency’s reigns in December promising to promote innovation and curb what he described as a culture of “over-zealous regulation.” Enforcement actions are down — there were 13 in fiscal 2025 and a similar number in 2026. That compares with 58 for 2024 and 96 in 2023, according to the agency’s data. At the same time, there’s been a steady drumbeat of reports about suspicious trading ahead of government decisions on both traditional futures and recently authorized prediction markets, where users can place wagers on everything from Monday Night Football to election results and geopolitical events.

Last year, unknown traders made millions of dollars buying options in the minutes before Trump paused tariffs. This year, there was suspicious trading on prediction markets ahead of the U.S. military’s capture of then-Venezuelan leader Nicolás Maduro and the joint U.S.-Israel operation that killed Iran’s Ayatollah Ali Khamenei. In April, U.S. authorities accused a soldier of making $400,000 on Polymarket using confidential information from the Maduro raid. “Anyone who engages in fraud, manipulation, or insider trading in any of our markets will face the full force of the law,” Selig said in a statement at the time. The soldier pleaded not guilty to Justice Department charges.

Bets tied to the Iran conflict, however, have been of an order of magnitude larger.

“The integrity of America’s commodity futures markets must remain above reproach,” a group of Democrats, led by Sen. Raphael Warnock, wrote in a May letter to Selig about the Iran trades. “It is critical that this investigation be carried out swiftly and publicly to reassure existing market participants that markets are stable and no participant has an unfair advantage.”

(With assistance from Chris Strohm and Jan-Patrick Barnert.)

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