Tuesday, 29 July 2014
Last updated 42 min ago
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.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…