Vitol Settles CFTC Hedge Fund Charges

Sep 15 2010 | 11:47am ET

Oil-trading giant Vitol Group has settled charges that it knowingly allowed the New York Mercantile Exchange to treat two of its subsidiaries—including its hedge fund—separately, allowing it to skirt trading restrictions.

Geneva-based Vitol will pay $6 million to settle the Commodities Futures Trading Commission claim. The regulator said that Vitol learned that the NYMEX was treating its Vitol Capital Management hedge fund and Vitol Inc. units separately, despite the fact that the two shared information, in June 2007. But instead of letting the exchange know, the CFTC alleged that Vitol simply restricted information-sharing between the two businesses.

“Instead of correcting the NYMEX’s misperception, VIC and VCM implemented only limited barriers to prevent the flow of trading information between them,” the CFTC said.

Vitol did not admit or deny any wrongdoing. NYMEX began aggregating the units’ trades in March 2009, after it was acquired by the CME Group.

“We are pleased to have reached a resolution to this matter on terms acceptable to all parties,” Vitol said. “Since 2007, we have put in place a new compliance organization, staffed by experienced compliance professionals, as well as the necessary processes and procedures.”

The settlement comes two years after the CFTC reclassified some Vitol Capital Management trades as speculative. The hedge fund trader behind those transactions, Andrew Serotta, was asked to leave the firm last year.

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