September 14, 2010
CFTC Sanctions Houston-based Vitol Inc. and Vitol Capital Management Ltd. $6 Million for Willfully Failing to Disclose Material Facts to the New York Mercantile Exchange
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against Vitol Inc. (VIC) and Vitol Capital Management Ltd. (VCM) of Houston, Texas, for willfully failing to disclose material facts to the New York Mercantile Exchange (NYMEX), now NYMEX/CME Group, concerning the relationship between the two companies. Both firms are non-clearing members of the NYMEX.
As a result of VIC’s and VCM’s willful failure to disclose the material facts, the NYMEX/CME Group did not aggregate the market positions of the two companies for position limit and accountability limit purposes for almost two years, the CFTC order finds.
The order requires VIC and VCM jointly and severally to pay a $6 million civil monetary penalty. The order also requires VIC and VCM to cease and desist from further violations of Section 9(a)(4) of the Commodity Exchange Act (Act), 7 U.S.C. § 13(a)(4) (2006). Section 9(a)(4) makes it unlawful for any person “willfully to falsify, conceal, or cover up by any trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or use any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry to a registered entity, board of trade, or futures association designated or registered under this Act in furtherance of its official duties under this Act.”
According to the CFTC order, VIC and VCM learned in June 2007 that the NYMEX misperceived the relationship between the two companies. Instead of correcting the NYMEX’s misperception, VIC and VCM implemented only limited barriers to prevent the flow of trading information between them. Thereafter, VIC and VCM willfully failed to disclose to the NYMEX the true nature of the firms’ relationship.
The order further finds that because VIC and VCM willfully failed to disclose to the NYMEX the true nature of their relationship and the limited barriers implemented to prevent the flow of trading information between the two companies, the NYMEX’s misperception continued. As a result, the NYMEX/CME Group did not aggregate the positions of VIC and VCM for the purposes of position limits and accountability levels until March 2009, according to the order.
The CFTC acknowledges the NYMEX’s cooperation in this matter.
The CFTC appreciates the cooperation and assistance in this matter of the United Kingdom Financial Services Authority and the Swiss Financial Market Supervisory Authority.
The CFTC Division of Enforcement staff members responsible for this case are Kathleen Banar, John Einstman, Michael Loconte, Erica Bodin, Rick Glaser and Richard Wagner.
Last Updated: September 24, 2010