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ALJ Certifies Settlement Of Charges Against Amaranth

December 8, 2008
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FERC Administrative Law Judge (ALJ) Carmen Cintron last Wednesday certified as uncontested a joint offer of settlement resolving charges that collapsed hedge fund Amaranth Advisors LLC, affiliates and two former natural gas traders manipulated gas trading activity in the futures market.

"Approval of the settlement is in the public interest," Cintron said in certifying the settlement to the Federal Energy Regulatory Commission (FERC), which can either approve or reject the ALJ's decision in full or part.

Details of the settlement were not disclosed. "Participants requested that the settlement be treated as nonpublic under the terms of the protective order issued in this proceeding until the Commission acts on the settlement. This request is granted."

FERC's Office of Enforcement, Amaranth Advisors, affiliates and former traders Brian Hunter and Matthew Donohoe filed the settlement at the agency in late November (see NGI, Dec. 1).

FERC in mid-July ordered an ALJ hearing to determine whether certain gas futures trading activities by Amaranth Advisors, affiliates and ex-traders violated the agency's anti-manipulation regulations (see NGI, July 21). Capping an investigation that began in May 2006, the Commission issued a show cause order in July 2007, accusing Amaranth and others of manipulating the New York Mercantile Exchange (Nymex) natural gas futures contract, which settles at the Henry Hub and ultimately determines physical gas prices over which FERC has jurisdiction (see NGI, July 30, 2007).

Amaranth and its one-time traders have challenged the charges at FERC and in the courts.

The Commission sought to assess civil penalties and require the disgorgement of profits totaling $291 million for Amaranth's activities in the Nymex gas futures market in February, March and April 2006.

Amaranth stands accused of committing 219 violations over the three-month period. The action against Amaranth marked the first prosecution of market manipulation by FERC using its expanded enforcement authority under the Energy Policy Act of 2005, and it also was the first time the Commission proposed maximum civil penalties.

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