The Federal Energy Regulatory Commission issued a $30 million civil penalty against former Amaranth Advisors LLC energy trader Brian Hunter, who is accused of manipulating the natural-gas futures market in 2006.
The fine “is a sufficient deterrent” to discourage traders from engaging in market manipulation, FERC Chairman Jon Wellinghoff told reporters today at the agency’s monthly meeting. Hunter has 30 days to pay or appeal, FERC said.
The agency alleged Hunter manipulated the price of contracts on the New York Mercantile Exchange in 2006 while boosting the value of financial derivatives.
Amaranth lost $6.6 billion betting on the price of natural gas. The Greenwich, Connecticut-based hedge fund that once controlled half of the natural-gas market, collapsed in 2006. In August 2009, the company agreed to pay $7.5 million to end U.S. cases brought by FERC and the Commodity Futures Trading Commission for trying to manipulate natural-gas prices. FERC had initially proposed a $291 million fine against Amaranth, Hunter and another trader, Matthew Donohoe, who settled with the agency.
A FERC judge ruled in January 2010 that Hunter had manipulated gas markets.
“The FERC has no jurisdiction according to Congress and the CFTC; therefore this means nothing,” Michael Kim, an attorney at Kobre & Kim LLP in New York who represents Hunter, said in a e-mailed statement today. Hunter can ask the agency to re-hear his case and, if denied, appeal to the U.S. Court of Appeals for the District of Columbia Circuit.
The case was the first in which FERC went after a participant in the futures market for actions it said affected the price of delivered gas, which it oversees.
“This is a seminal case in FERC law,” Susan Court, an attorney with Hogan Lovells US LLP and a former FERC enforcement director, said in a phone interview.