The Federal Energy Regulatory Commission is seeking $259 million from hedge fund Amaranth Advisors L.L.C. and $30 million from former trader Brian Hunter for manipulating the energy markets.
FERC said it was the first time it has used a new enforcement authority to prosecute a charge of market manipulation. The agency is also pursuing $167 million in sanctions against Energy Transfer Partners LP, a Texas company that owns pipeline assets and a natural-gas trading floor.
Hunter”™s wayward bet on natural gas spreads last year doomed Greenwich-based Amaranth, which subsequently laid off most employees and is in the process of shutting down, although at the time of the FERC report it still had $600 million in assets.
Hunter is a founder of Solengo Capital Advisors LLC, which has offices in Greenwich and Calgary, Alberta where Hunter lives.
On three occasions in early 2006, Hunter ran an experiment in which Amaranth sold an extraordinary amount of contracts during the last 30 minutes of trading on a natural gas futures board, FERC maintains, driving down the final settlement price.
FERC said it initiated its investigation last summer before the Hunter trades that led the company”™s demise, and that the events were not linked.
“The manipulative schemes in question were designed to lower prices in one market in order to benefit positions held in a related market,” said FERC Chairman Joseph Kelliher, in a prepared statement. “Market manipulation undermines the integrity of markets, regardless of whether prices are manipulated upward or downward ”¦ A company that manipulates prices downward today may try to manipulate prices upward tomorrow.”
Matthew Donohoe, a former Amaranth employee who executed Hunter”™s trades, also faces a $2 million FERC disgorgement penalty.
The company and the two men have 30 days to address the FERC charges.
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