Hunter Sued By FERC, Pledges To Fight CFTC Charges

Jul 26 2007 | 11:19am ET

A lawyer for former Amaranth Advisors energy trader Brian Hunter accused U.S. regulators of filing “politically motivated” charges and vowed to fight to clear his name. But his troubles were multiplying, as the Federal Energy Regulatory Commission filed its own charges against Hunter, after Hunter’s efforts to prevent it were defeated.

Michael Kim, an attorney representing Hunter, said his client “simply did not undertake any manipulative trading and we are going to prove it.”

“None of these various government bodies can come up with a consistent theory of Mr. Hunter’s alleged misconduct because in fact there was no misconduct” he said. “These accusations from the CFTC and the FERC against Brian Hunter are aimed at finding a scapegoat to bear the public outrage over ever-increasing energy prices. We will not stand idly by as the regulators use Brian for political cover, their action is meritless and we will prove it.”

According to Canadian newspaper the Globe and Mail, another person close to Hunter’s defense blamed American politics generally, and U.S. Sen. Carl Levin (D-Mich.) in particular, for the pressure on regulators. Kim added that the evidence in the CFTC complaint is presented in an unfair way to his client.

Meanwhile, after a court ruled against Hunter in his suit to prevent FERC from filing charges—Hunter’s lawyers had argued “FERC is not [emphasis in original] statutorily authorized to regulate futures markets for energy commodities, which include natural gas futures contracts”—FERC did just that, accusing Amaranth, Hunter and another former Amaranth trader, Matthew Donohoe, with market manipulation.

In addition to malfeasance surrounding the Feb. 24, 2006, and April 26, 2006, expiry dates laid out in the CFTC complaint, FERC adds March 29, 2006, the expiry date for the April 2006 New York Mercantile Exchange natural gas futures contract. FERC is seeking $200 million in penalties against Amaranth, $30 million against Hunter and $2 million against Donohoe, as well as disgorgement of more than $59 million in ill-gotten profits from Amaranth.

Amaranth, Hunter and Donohoe have 30 days to respond to FERC’s charges.

In a release, FERC Chairman Joseph Kelliher refuted Hunter’s argument that his commission has no jurisdiction in the matter.

“Congress granted FERC the authority to prevent manipulation to protect both consumers and the integrity of these markets on which our economy depends,” he said. “Bad actors in the industry must recognize that manipulation, even in increasingly complex energy markets, can be detected. And when it is proven, they will be punished severely.” FERC argues that there is an “important nexus between the wholesale interstate natural gas markets under FERC jurisdiction and the NYMEX Natural Gas Futures Contract,” which is the CFTC’s purview.

In addition to manipulating the settlement prices of the March and May NYMEX contracts, the CFTC yesterday accused Amaranth and Hunter of seeking to cover up their actions after the NYMEX caught wind of them. The CFTC and FERC collaborated on the investigation, which uncovered several potentially damning instant-message conversations involving Hunter and included in the CFTC’s complaint.

HUNTER'S INSTANT-MESSAGE CONVERSATIONS

THE FILINGS:

FERC's order to show cause
CFTC enforcement action
Brian Hunter's complaint against FERC
Brian Hunter's declaration

SOLENGO'S MARKETING BROCHURE 

RELATED STORIES:

Amaranth, Hunter Hit With Market Manipulation Charges


In Depth

Fitch Says Alternative Asset Managers 'Stable' Despite Dry Powder

Nov 20 2014 | 9:30am ET

Ratings agency Fitch says the outlook for seven publicly traded alternative asset...

Lifestyle

Cohen Buys $101 Million Sculpture

Nov 12 2014 | 9:17am ET

Steven Cohen was the sole bidder for a rare Alberto Giacometti sculpture at Sotheby...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.