Amaranth Advisors settles gas market manipulation charges

Amaranth Advisors LLC will pay a $7.5 million civil fine to settle federal charges that it tried to manipulate natural gas markets, two federal regulatory agencies said on Aug. 12.

Amaranth Advisors LLC will pay a $7.5 million civil fine to settle federal charges that it tried to manipulate natural gas markets, two federal regulatory agencies said on Aug. 12.

The Greenwich, Conn., firm and its affiliates agreed to pay the fine to resolve charges by both the Federal Energy Regulatory Commission and the US Commodity Futures Trading Commission that Amaranth tried to manipulate New York Mercantile Exchange natural gas futures contract prices on Feb. 24 and April 26, 2006. The agencies separately cited the Amaranth entities and two of its traders in July 2007.

Brian Hunter, Amaranth’s head energy trader, was not part of the settlement with FERC, which said that it has scheduled an Aug. 18 hearing on its case against him. Matthew Donohoe, Amaranth’s top natural gas trader, was part of the FERC settlement, but the CFTC said that its claims against him were not affected.

A court order filed Aug. 12 in the federal district court for southern New York also permanently enjoins the Amaranth entities from violating the Commodity Exchange Act’s anti-manipulation provisions, and from making false, fictitious, or fraudulent statements to NYMEX or any other registered entity, the CFTC said.

FERC said that its litigation enforcement office staff approved an uncontested joint settlement with Amaranth and several affiliates, including Amaranth Advisors, Amaranth LLC, Amaranth Partners LLC, Amaranth Capital Partners LLC, Amaranth Management Limited Partnership, Amaranth International Limited, Amaranth Group Inc., Amaranth Advisors (Calgary) ULC, and Donohoe.

Agreement’s terms

That settlement arose out of FERC claims that the Amaranth parties allegedly violated the agency’s rule against manipulating markets for the sale or purchase of gas transportation services under FERC’s jurisdiction. Under the settlement, FERC said that the Amaranth parties stipulate to facts regarding their positions in the natural gas futures contracts, sales of those contracts and positions in derivative swaps.

They also stipulate that FERC properly raised questions about the effects of futures contracts trading on prices in the physical natural gas market because the trading at issue appeared atypical, anomalous and unusual, and therefore had the potential to erode public confidence in the validity of the settlement price, the agency continued.

It said that the settlement also states that FERC properly investigated the trading, and the Amaranth parties concede FERC’s subject matter jurisdiction in this proceeding. Amaranth Advisors LLC, Amaranth Advisors (Calgary) ULC, and Matthew Donohoe acknowledge that they are accountable for their trading in NYMEX NG Futures Contracts, which raised legitimate questions about the effect of the trading on prices in the physical natural gas market.

FERC said that the Amaranth parties also agreed to dismiss their pending appeal in the United States Court of Appeals for the District of Columbia Circuit and that they will not make any public statement denying any allegation in the order to show cause or the settlement agreement, or create or tend to create the impression that the order to show cause or the settlement agreement are without factual basis.

Contact Nick Snow atnicks@pennwell.com

More in Economics & Markets