The Commodities Futures Trading Commission filed a case on May 24, 2011 alleging that certain commodities traders including Parnon Energy, Inc., Arcadia Petroleum Ltd. and Arcadia Energy (Suisse) SA ("Defendants") violated the Commodities Exchange Act. The complaint alleges that defendants caused the price of futures and options contracts on West Texas Intermediate light sweet crude oil ("WTI") traded on the New York Mercantile Exchange ("NYMEX") to be artificial by carrying out a cross-market trading scheme between January and April of 2008 involving the accumulation and sell-off of a substantial position in physical crude oil to manipulate futures prices.
During the relevant period Defendants allegedly traded futures and other contracts that were priced off of the price of WTI. WTI is delivered to commercial users at Cushing, Okla., a major crude oil delivery point. The price of WTI is a benchmark for crude oil prices around the world, and the supply of WTI at Cushing is an important driver of WTI price.
According to the allegations in the CFTC case, Defendants conducted a manipulative cycle, driving the price of WTI to artificial highs and then back down, to make unlawful profits. First, they allegedly purchased large quantities of physical WTI crude oil during the relevant period, even though they did not have a commercial need for crude oil. They allegedly purchased the oil pursuant to their scheme to dominate and control the already-tight supply at Cushing to manipulate the price of WTI upward and to profit from the corresponding increase in value of their WTI futures and options contracts on NYMEX and IntercontinentalExchange ("ICE").
Next, once WTI reached artificially high prices and they had taken profits from their long WTI Derivative position, Defendants allegedly engaged in additional trading activity – selling more WTI Derivatives short at the artificially high prices.
Finally, defendants allegedly strategically sold off their physical holdings of WTI, mostly all on one day, to drive the WTI price back down and to profit from their short WTI Derivatives position.
Defendants allegedly realized profits from their WTI Derivatives trading that exceeded $50 million, according to the CFTC complaint.
Investors who believe that they may have been harmed by the alleged manipulative scheme may have the right to commence private litigation, and are welcome to contact the Firm to discuss their possible claims.
The CFTC complaint is accessible below.