CFTC Sets $13 Million Pact in Crude-Oil Case

U.S. commodity regulators settled an oil-market-manipulation case stemming from the 2008 price run-up against three companies and two traders for $13 million, a fraction of what authorities alleged they made in profits from the strategy.

The Commodity Futures Trading Commission said in an announcement, issued Tuesday night, that Parnon Energy Inc., Arcadia Petroleum Ltd., Arcadia Energy (Suisse) SA, as well as traders James T. Dyer and Nicholas J. Wildgoose, would pay the penalty and retain an independent consultant to monitor compliance, risk management and internal controls.

Parnon also agreed to limitations on physical-oil-market trading for three years under a consent order filed in court earlier Tuesday.

The commission filed the case in May 2011, alleging that the defendants made $50 million by manipulating levels of physical crude-oil inventories in early 2008 to benefit bets they had placed in financial-derivatives markets.

The case was the only enforcement action to arise from the huge run-up in oil prices in 2008, when the market peaked at $147 a barrel amid widespread focus on the role speculation was playing in the market.

In a May ruling, Judge William H. Pauley III of U.S. District Court in New York blasted the government’s handling of evidence in the case, saying enforcement lawyers were “completely reckless” in turning over material that could have revealed a confidential informant’s identity to the defendants.

WSJ