For Release: July 25, 2007
U.S. Commodity Futures Trading Commission Charges Hedge Fund Amaranth and its Former Head Energy Trader, Brian Hunter, with Attempted Manipulation of the Price of Natural Gas Futures
Complaint Also Alleges That Amaranth Advisors L.L.C. Tried to Cover Up the Conduct by Making False Statements to the New York Mercantile Exchange (NYMEX)
Washington, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a civil enforcement action in the United States District Court for the Southern District of New York against Amaranth Advisors, L.L.C., Amaranth Advisors (Calgary) ULC (collectively “Amaranth”), and Brian Hunter, alleging that defendants engaged in a scheme of price manipulation that violated the Commodity Exchange Act, as amended (the Act). Specifically, the Complaint alleges that the defendants intentionally and unlawfully attempted to manipulate the price of natural gas futures contracts on the NYMEX on February 24 and April 26, 2006. The CFTC is seeking permanent injunctive relief, an award of civil penalties, and other remedial and ancillary relief as is necessary.
“This case demonstrates the Commission’s ongoing vigilance to punish those who attempt to compromise the integrity of the futures markets,” said CFTC Acting Chairman Walter Lukken. “The CFTC continues in its unwavering determination to ensure that the futures markets operate in an open and competitive manner free from price distortions.”
“The CFTC stands ready to enforce the provisions of the Commodity Exchange Act against those who attempt to manipulate U.S. futures and commodity prices. The filing today sends an important message to market participants that such conduct will be met with appropriate sanctions,” CFTC Commissioner Michael Dunn added.
February 24, 2006 was the last day of trading (“expiry day”) for the March 2006 NYMEX natural gas futures contract and April 26, 2006 was the expiry day of the May 2006 NYMEX natural gas futures contract. The settlement price of each NYMEX natural gas futures contract is determined by the volume weighted average of trades executed from 2:00-2:30 p.m. (the “closing range”) on the expiry day of such contracts.
The Complaint alleges that, for each of the expiry 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 (ICE). The settlement price of the ICE swaps is based on the NYMEX natural gas futures settlement price determined by trading done during the closing range on expiry day. 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 Complaint also alleges that, in violation of the Act, and in response to an inquiry from NYMEX about the April 26, 2006 trading, Amaranth Advisors L.L.C. made false statements to NYMEX to cover up defendants’ attempted manipulation. For more detail on the allegations, please see the attached excerpts from the Amaranth Complaint.
The Commission wishes to thank the Federal Energy Regulatory Commission (FERC), the Securities and Exchange Commission, and the New York Mercantile Exchange for their assistance with this investigation. Of particular note is the CFTC’s coordination with the FERC on this matter, per the agencies’ Memorandum of Understanding.
The following CFTC staff members are responsible for this matter: Michael C. McLaughlin, Elizabeth C. Brennan, David Oakland, Linda Y. Peng, Karin N. Roth, W. Derek Shakabpa, David W. MacGregor, Michael Penick, Manal Sultan, Lenel Hickson, Jr., Stephen J. Obie, and Vincent McGonagle.
Last Updated: July 31, 2007