A U.S. District Court judge has approved a $77.1 million settlement to resolve claims against Amaranth Advisors LLC, a hedge fund that collapsed in September 2006 after suffering $6 billion in market losses due to wrong-headed bets in natural gas futures.

Judge Shira A. Scheindin of the U.S. District Court for the Southern District of New York preliminarily approved the class-action settlement [Amaranth Natural Gas Commodities Litigation 1:07-Civ.-6377]. The judge has ordered Amaranth to pay the settlement amount in two parts — $72.4 million and $4.7 million. A hearing on final approval of the deal is scheduled for March 27.

In August 2009 the Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) entered into separate settlements requiring Amaranth Advisors and affiliates to pay a total of $7.5 million in penalties to settle the claims that they manipulated or attempted to manipulate natural gas futures prices (see Daily GPI, Aug. 13, 2009).

Amaranth, seven affiliates and former trader Matthew Donohoe — the parties to the FERC settlement — were accused of manipulating or attempting to manipulate the New York Mercantile Exchange (Nymex) natural gas futures contract, which settles at the Henry Hub and has a direct bearing on physical gas prices over which FERC has jurisdiction. Former Amaranth gas trader Brian Hunter was not part of the FERC agreement.

In its initial show-cause order, FERC sought civil penalties and disgorgement of profits totaling $291 million for Amaranth’s activities that occurred in February, March and April 2006 (see Daily GPI, July 27, 2007). The CFTC, which filed a concurrent complaint, accused Amaranth and Hunter of “intentionally and unlawfully” attempting to manipulate the price of gas futures contracts on Nymex on Feb. 24 and April 26, 2006 (see Daily GPI, July 26, 2007).

Hunter is the only former Amaranth party who has refused to settle. FERC has imposed a $30 million penalty on him. The U.S. Court of Appeals for the District of Columbia last week agreed to review the FERC order (see Daily GPI, Dec. 16).

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.