Defunct hedge fund Amaranth Advisors LLC, which last year lost more than $6 billion in bad bets on the natural gas market, agreed to pay $716,819 to settle charges with the Securities and Exchange Commission (SEC) that it sold securities short in offerings and covered its positions by buying securities in the offerings, the SEC said Wednesday.
The penalty amount breaks down to $150,000 for a civil penalty, $507,627 in disgorgement and $59,192 in prejudgment interest. Amaranth, which is based in Greenwich, CT, neither admitted nor denied the charges.
"In connection with five follow-on offerings conducted between November 2004 and February 2005, Amaranth sold securities short during the five business days before the pricing of those offerings and then covered the short positions with securities purchased in the offerings ('offering shares')," the SEC said. "These transactions violated Rule 105 of Regulation M, and resulted in funds advised by Amaranth making profits of $507,627."
Companies with shares involved in the Amaranth transactions are Coeur D'Alene Mines Corp., Catapult Communications Corp., Cleco Corp., MEMC Electronic Materials Inc. and American Superconductor Corp.
Amaranth told investors that the penalty is unrelated to its natural gas trading activities. Amaranth's bad bets in the natural gas market first came to light in September (see Daily GPI, Sept. 19).
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