May 24, 2011
CFTC Charges Parnon Energy Inc., Arcadia Petroleum Ltd. and Arcadia Energy (Suisse) SA with Price Manipulation in the Crude Oil Market
Complaint alleges cross-market trading scheme in 2008 involving accumulation and sell-off of a substantial position in physical crude oil to manipulate futures prices, yielding in excess of $50 million in unlawful profits for defendants.
James Dyer and Nick Wildgoose, who directed the manipulative trading scheme alleged in the complaint, are also charged.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today filed a civil enforcement action in the United States District Court for the Southern District of New York against Parnon Energy Inc. (Parnon) of California, Arcadia Petroleum Ltd. (Arcadia Petroleum) of the United Kingdom, Arcadia Energy (Suisse) SA (Arcadia Suisse) of Switzerland, James T. Dyer of Australia and Nicholas J. Wildgoose of California, charging them with unlawfully manipulating and attempting to manipulate New York Mercantile Exchange (NYMEX) crude oil futures prices from January 2008 to April 2008.
As alleged in the CFTC complaint, during the relevant period defendants traded futures and other contracts that were priced off of the price of West Texas Intermediate light sweet crude oil (WTI). WTI is delivered to commercial users at Cushing, Okla., a major crude oil delivery point. The price of WTI is a benchmark for crude oil prices around the world, and the supply of WTI at Cushing is an important driver of WTI price.
According to the allegations, defendants conducted a manipulative cycle, driving the price of WTI to artificial highs and then back down, to make unlawful profits. First, they purchased large quantities of physical WTI crude oil during the relevant period, even though they did not have a commercial need for crude oil. They purchased the oil pursuant to their scheme to dominate and control the already tight supply at Cushing to manipulate the price of WTI upward and to profit from the corresponding increase in value of their WTI futures and options contracts (WTI Derivatives) on NYMEX and IntercontinentalExchange (ICE). Next, once WTI reached artificially high prices and they had taken profits from their long WTI Derivative position, defendants allegedly engaged in additional trading activity – selling more WTI Derivatives short at the artificially high prices. Finally, defendants allegedly strategically sold off their physical holdings of WTI, mostly all on one day, to drive the WTI price back down and to profit from their short WTI Derivatives position. Pursuant to this manipulative cycle, driving the WTI price up and then back down, which they conducted in January and March 2008, and attempted in April 2008, defendants realized profits from their WTI Derivatives trading that exceeded $50 million, according to the complaint.
The complaint alleges that by engaging in such conduct, Dyer and Wildgoose violated Sections 6(c), 6(d) and 9(a)(2) of the Commodity Exchange Act, 7 U.S.C. §§ 9, 13b, 13(a)(2). Accordingly, the liability of corporate defendants Parnon, Arcadia Petroleum and Arcadia Suisse is based upon the alleged violations of their agents and/or employees, including Dyer and Wildgoose, pursuant to Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B).
In its ongoing litigation, the CFTC seeks permanent injunctive relief, disgorgement, restitution, trading and registration bans, imposition of civil monetary penalties and all other appropriate remedial relief.
The Commission appreciates the assistance of the Financial Services Authority of the United Kingdom and the Australian Securities & Investments Commission in this matter.
The following CFTC Division of Enforcement staff members are primarily responsible for this case: Melanie Devoe, Jennifer Diamantis, Saadeh Al-Jurf, Dmitriy Vilenskiy, Greg Scopino, George Malas, Eugene Smith, Russ Battaglia, Jeremy Cusimano, Joan Manley, Paul Hayeck and Christine Ryall.
Last Updated: May 24, 2011