A federal appeals court in Washington, DC last 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. The order came two days after the U.S. District Court in Washington denied another former Amaranth trader’s bid to enjoin FERC from moving forward with the enforcement against him.
Amaranth and former trader Matthew Donohoe 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.
Last Tuesday, the district court in Washington denied a request of ex-Amaranth trader Brian Hunter for an injunction barring FERC from proceeding with its enforcement action against him.
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.
U.S. District Judge Richard J. Leon rejected Hunter’s argument that the court’s failure to enjoin FERC would result in “irreparable harm” to him. Hunter argued that FERC’s enforcement action was frustrating his ability to get his new business venture, Solengo Capital Advisors ULC, off the ground. Moreover, Leon dismissed the injunction request because he said it was “unlikely” that Hunter would succeed on the merits of his case. He further said an injunction was not found to be in the public interest.
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 NGI, July 30). 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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