Thursday, 24 July 2014
Last updated 4 hours ago
May 23 2008 | 2:37pm ET
The U.S. Commodity Futures Trading Commission announced today that a judge has denied motions by defendants Amaranth Advisors and Brian Hunter to dismiss charges brought against them by the CFTC in a complaint filed on July 25 on last year.
In that complaint, the CFTC charged the defendants with attempted manipulation of the natural gas markets and charged Amaranth with making false statements to the New York Mercantile Exchange to cover up defendants’ attempted manipulation.
Specifically, the complaint alleges that Amaranth and Hunter engaged in a scheme to attempt to manipulate the price on the last day of trading of the March 2006 and May 2006 natural gas futures contracts traded on NYMEX.
The complaint alleges that, for each of the days at issue, the defendants acquired more than 3,000 NYMEX natural gas futures contracts in advance of the closing range, which they planned to, and for the most part did, sell during the closing range. The complaint also alleges that defendants held large short natural gas financially-settled swaps positions, primarily held on the IntercontinentalExchange. The Complaint alleges that defendants intended to lower the prices of the NYMEX natural gas futures contracts to benefit defendants’ larger swaps positions on ICE and elsewhere.
The defendants sought to dismiss the attempted manipulation charge on grounds that the CFTC, in its pleadings, failed to state a claim upon which relief could be granted and also failed to plead the claims with sufficient particularity.
The court refused to dismiss the claim, holding that the CFTC sufficiently plead both elements of an attempted manipulation: an intent to affect market prices and an overt act in furtherance thereof. More specifically, the court held that the CFTC had sufficiently alleged facts from which one could reasonably infer an intent on the part of Amaranth and Hunter to affect the prices of natural gas futures contracts.
In addition, Hunter, who is a Canadian citizen and directed part of the trading in question while in Amaranth’s Calgary office, sought to dismiss the complaint against him because, he argued, the U.S. federal court lacked jurisdiction. The court rejected this argument, holding that his personally placing orders through a NYMEX broker and directing other traders at Amaranth to trade on NYMEX showed that he was clearly transacting business in New York and thus subject to the court’s jurisdiction.
The case against both Amaranth and Hunter continues. The CFTC is seeking a permanent injunction, civil monetary penalties and other relief from each defendant in the case. Meanwhile, Hunter is hard at work at another investment firm (see related articles below).
Hunter’s Bets Keep Paying Off For Peak Ridge
Brian Hunter Lands Gig At Private Equity Firm
Amaranth, Hunter Hit With Market Manipulation Charges
Amaranth Hits Back At Pension Adversary
Solengo Can’t Keep 'Confidential' Brochure Off The Web
Solengo Plans To Keep Hunter On Short Leash
Amaranth Hit For Naked Shorts
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…