Parnon Energy Inc., an oil logistics company, and London-based oil trader Arcadia Petroleum Ltd. agreed to pay $13 million to settle a U.S. regulator’s claims they manipulated oil futures prices.
The accord, filed today in federal court in Manhattan, follows U.S. District Judge William H. Pauley III’s refusal in April to throw out the lawsuit filed in 2011 by the U.S. Commodity Futures Trading Commission. The agency contended the companies illegally made more than $50 million in 2008 by trading derivatives tied to the price of West Texas Intermediate crude.
Parnon Energy will face limitations on its physical market trading for three years under the deal, the CFTC said in a statement.
The settlement comes after regulators in Europe, Japan and South Korea have begun probes of how benchmark oil prices are set. Traders are accused in more than a dozen lawsuits in the U.S. of conspiring with companies including BP Plc, Statoil ASA and Royal Dutch Shell Plc to manipulate the price of Brent crude, the North Sea oil benchmark is used to price more than half the world’s crude that helps determine the costs for fuels such as gasoline and heating oil.
The CFTC also sued and settled with James Dyer and Nicholas Wildgoose, who directed the derivatives trading for the companies, according to the CFTC. They amassed a stockpile of crude oil to dominate supplies, then bought long and short positions in oil futures to make gains on the “artificial” rise in prices, the agency said.
As part of the settlement, the defendants, who neither deny or admit wrongdoing, must provide to the CFTC a weekly list of their crude oil positions for delivery at Cushing, Oklahoma.
“Beyond the terms of the order, my only comment on behalf of the defendants is that we are pleased to have resolved this matter with the CFTC,” Paul Adams, Parnon Energy’s chief executive officer, said in an e-mail.
Parnon Energy, based in Rancho Santa Fe, California, and London-based Arcadia Petroleum, are subsidiaries of Farahead Holdings Inc., a closely held company based in Cyprus, according to Adams.
The case is U.S. Commodity Futures Trading Commission v. Parnon Energy Inc., 11-3543, U.S. District Court, Southern District of New York (Manhattan).