FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
Federal Court Orders $13 Million Fine in CFTC Crude Oil Manipulation Action against Parnon Energy Inc., Arcadia Petroleum Ltd., and Arcadia Energy (Suisse) SA, and Crude Oil Traders James Dyer and Nicholas Wildgoose
Order Imposes Significant Physical Market Trading Limitations against Companies
The CFTC’s Complaint charged Defendants with manipulation and attempted manipulation of New York Mercantile Exchange (NYMEX) Light Sweet Crude Oil futures contract spreads from January 2008 to April 2008 (see CFTC Press Release and Complaint 6041-11, May 24, 2011).
The consent Order, entered on August 4, 2014, by Judge William H. Pauley III of the U.S. District Court for the Southern District of New York, requires the Defendants to pay a $13 million civil monetary penalty, provides limitations on Parnon’s physical market trading for three years, and requires the companies to maintain records and audio recordings for three years. The Order further requires the companies to engage an independent consultant to evaluate compliance, internal control and risk management policies, procedures, and practices, and to implement any resulting recommendations.
“Through resolution of this litigation, the CFTC is holding accountable market participants who sought to profit by undermining the integrity of the U.S. crude oil markets,” commented CFTC Director of Enforcement Aitan Goelman. “The CFTC will continue to work to ensure the integrity of the markets we are responsible for protecting from manipulation, whether direct or indirect.”
The CFTC’s Complaint alleged that the Defendants, taking advantage of a tight physical market, executed a manipulative trading strategy designed to affect NYMEX crude oil futures contract spreads by knowingly amassing a dominant and controlling position in physical WTI crude oil, which is the primary grade of oil deliverable at Cushing, Oklahoma under the NYMEX futures contract; holding the physical position until after futures expiry with the intent to affect NYMEX crude oil spreads; and selling-off the physical position in a concentrated fashion during a time period known as the “cash window” at a loss. The Complaint further alleged that the Defendants sought to generate profits through their manipulative conduct by buying WTI futures spreads prior to widening the spreads through their manipulation and selling WTI futures spreads prior to dumping their physical WTI crude oil position. The Complaint also charged the Defendants with attempted manipulation of the May/June 2008 spread in April 2008. Defendants Dyer and Wildgoose allegedly directed the manipulative trading.
CFTC Division of Enforcement staff members primarily responsible for this case are Christine Ryall, Elizabeth Davis, Jonathan Robell, John Einstman, Melanie Devoe, Amanda Harding, Sophia Siddiqui, Luke Marsh, Saadeh Al-Jurf, George Malas, Tashieka Taylor, Maura Stavrakis, Joan Manley, and Paul Hayeck.