The former Amaranth Advisors LLC trader who was overseeing the energy desk when the fund collapsed in 2006 has agreed to pay the Commodity Futures Trading Commission (CFTC) $750,000 to resolve a lawsuit accusing him of attempting to manipulate natural gas futures prices.
The proposed consent order between CFTC and Brian Hunter was disclosed Monday in U.S. District Court for the Southern District of New York [U.S. Commodity Futures Trading Commission v. Amaranth Advisors LLC, No. 07-cv-06682]. If the court approves the settlement, it could complete one of the highest profile enforcement actions by the CFTC and avoid a trial that was set to begin in October.
In addition to the monetary settlement, the court’s order permanently bans Hunter from trading in the settlement period for the last day of trading in all CFTC-regulated products and permanently bans Hunter from trading all CFTC-regulated natural gas products during the daily closing period. The order further permanently prohibits Hunter from registering with the CFTC, or claiming exemption from registration.
In September 2006 Amaranth revealed that bad bets in gas futures run by Hunter had cost the company about 65% of its $9.5 billion asset value, or more than $6 billion (see Daily GPI, Sept. 26, 2006). The CFTC and the Federal Energy Regulatory Commission sued in July 2007, alleging that the company and Hunter had attempted to manipulate the price of futures contracts on the New York Mercantile Exchange (see Daily GPI, July 26, 2007).
Amaranth agreed to pay a $7.5 million penalty to settle charges by CFTC and FERC (see Daily GPI, Aug. 13, 2009). The hedge fund in 2011 also agreed to pay $77.1 million in 2011 to settle a class action lawsuit by traders (see Daily GPI, Dec. 22, 2011).
The regulators' cases against Hunter is considered a touchstone as they have been used in formal arguments for some of their contested rules, including cross manipulation in the markets, and on caps on the overall positions in futures markets any one trader may hold. The cases also have led the CFTC and FERC to ponder individual gas trading rights in corporate settlements (see Daily GPI, April 9; March 18, 2013).