A federal court in Washington, DC Thursday denied the requests of failed hedge fund Amaranth Advisors LLC and a former trader to stay FERC’s enforcement actions against them for alleged manipulation of natural gas markets.
Amaranth and Matthew Donohoe, a former Amaranth gas trader, had sought stays of the Federal Energy Regulatory Commission’s show cause proceedings in which both are accused of manipulation in the gas futures markets, which the agency contends negatively influenced prices in the FERC-jurisdictional physical gas markets.
“Petitioners have not satisfied the stringent standards required for a stay pending court review,” said a two-judge panel with the U.S. Court of Appeals for the District of Columbia Circuit. The court further denied the parties’ requests to expedite the appeals process.
The appellate order comes only a few days after the U.S. District Court in Washington denied a request of another former Amaranth trader, Brian Hunter, to enjoin FERC from proceeding with its enforcement action against him (see Daily GPI, Dec. 12).
Hunter challenged FERC’s jurisdiction to sanction him for alleged manipulative activities in the gas futures market, claiming that the agency had overstepped the authority granted to it by Congress in the Energy Policy Act of 2005 and had encroached on the jurisdictional territory of the Commodity Futures Trading Commission (CFTC) in the futures market.
FERC in late July issued a show cause order that alleged Amaranth, several affiliates and traders Donohoe and Hunter, by manipulating gas futures on the New York Mercantile Exchange (Nymex), influenced the price in the physical gas markets (see Daily GPI, July 27). The agency said many participants in physical gas markets, particularly those located in eastern markets and in the Gulf Coast region, use the settlement price of the Nymex gas futures contract to determine the price of FERC-jurisdictional physical gas transactions.
The Amaranth hedge fund was liquidated in late 2006 after losing $6 billion in natural gas trades. In addition to the FERC enforcement action and a parallel CFTC complaint against the parties, the Securities and Exchange Commission subpoenaed former Amaranth officials to testify about the hedge fund’s activities in the futures market.
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