Category

Criminal

24 October 2016

Spoofing Case Settled – Oystacher and 3Red Trading Settle with the CFTC

On October 19, Igor Oystacher and his firm, 3Red Trading, announced in court that they had reached an agreement in principle with the CFTC that settles a spoofing lawsuit ahead of trial scheduled for January in the U.S. District Court for the Northern District of Illinois.  Oystacher and 3Red Trading faced allegations that they placed fake orders on several futures markets in order to make money based on resulting price fluctuations.  The CFTC sued Oystacher in October 2015, alleging that he placed false buy and sell orders on six contract markets (including copper, crude oil and natural gas) between 2011 and 2014.  According to the CFTC, Oystacher never intended to fill those orders, but instead used these “spoof” orders to take advantage of the resulting misperceptions about market demand.  Lawyers for the parties told the court that minor details of the agreement still needed to be finalized, but those details likely would not hold up the settlement.

Notably, Judge St. Eve recently rejected Oystacher’s viewpoint that the statute didn’t give traders fair notice of potential misconduct.  In denying his motion to dismiss, Judge St. Eve said that economic laws and regulations have a much less stringent vagueness standard than other laws because those participating in the markets are much more likely to consult the law.

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13 October 2016

CFTC Fines Individual for Illegal Futures and Options Trading

On September 29, the CFTC issued an order filing and settling charges against Jon P. Ruggles for engaging in fraudulent, fictitious, and noncompetitive trades in crude oil and heating oil futures and options and RBOB gasoline futures on the New York Mercantile Exchange (NYMEX) from March 2012 to December 2012.  The CFTC found that Ruggles, who was responsible for developing his former employer’s fuel hedging strategies and executing the employer’s trades in those NYMEX products, owed a duty of trust and confidence to act in the employer’s best interest and to keep confidential the employer’s material, nonpublic information regarding its trading activity.  According to the order, Ruggles breached those duties and misappropriated the employer’s confidential, material, nonpublic trading information for his own personal benefit by trading the same NYMEX products in personal accounts in his wife’s name, which he controlled.  The CFTC’s order requires Ruggles to disgorge over $3.5 million and imposes a civil penalty of $1.75 million.  Ruggles is also permanently banned from trading and registering with the CFTC.

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12 October 2016

TOTAL Files Motion to Expedite Appeal in Fifth Circuit

On October 3, TOTAL filed a motion for expedited consideration of its appeal to the Fifth Circuit in its declaratory judgment action against FERC.  TOTAL requested that the court enter an accelerated briefing schedule, that preparation of the record on appeal be expedited, and that the case be calendared for oral argument as soon as practicable after completion of briefing.  According to TOTAL, this expedited treatment is necessary to spare TOTAL—and taxpayers—the costs of an unlawful agency adjudicatory proceeding before a FERC administrative law judge for FERC’s market manipulation case against TOTAL.

(more…)

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12 October 2016

Court denies summary judgment, excludes certain expert testimony and sets trial date in the CFTC’s case against DRW and Wilson

On September 30, Judge Analisa Torres of the U.S. District Court for the Southern District of New York issued an order denying motions for summary judgment, and partially granting motions to exclude certain testimony in the CFTC’s enforcement action against defendants DRW Investments, LLC and Donald R. Wilson for alleged manipulation and attempted manipulation of the price of certain futures contracts on interest rate swaps.  With respect to the CFTC’s market manipulation claims, Judge Torres found that CFTC must prove the defendants had the specific intent to affect market prices that did not reflect the legitimate forces of supply and demand.  In doing so, Judge Torres rejected the CFTC’s interpretation that the intent standard is merely the intent to affect market price.  In addition, Judge Torres granted in part, and denied in part, each party’s motions to exclude certain expert testimony.

After this ruling, the case was reassigned to Judge Richard J. Sullivan.  On October 7, Judge Sullivan issued an order setting the case for jury trial to begin on December 1, and instructed the parties to submit a joint proposed pretrial order.

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03 October 2016

Energy Enforcement Update

Recent developments:

  • Coaltrain and individuals file motions to dismiss FERC’s complaint.
  • CFTC orders Angus to pay civil penalty for acting as an unregistered Commodity Trading Advisor and disclosure violations.
  • CFTC orders Barclays to pay $500,000 for EFRP recordkeeping violations.
  • Maxim Power settles market manipulation case with FERC.
  • TOTAL files appeal to Fifth Circuit in declaratory judgment proceeding.
  • FERC Enforcement files reply to TOTAL in show cause proceeding.
  • TOTAL files motion to dismiss amended class action complaint.
  • FERC files motion for summary judgment against City Power.

(more…)

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21 September 2016

Energy Enforcement Update

Recent developments:

  • CFTC Chairman Massad plans to recommend that the CFTC abandon its proposal to allow private rights of action in RTO/ISO markets.
  • FERC and City Power file joint status report in district court proceeding.
  • District court judge denies TOTAL’s request for reconsideration.
  • BP files petition for review with Fifth Circuit, and FERC grants BP’s motion for modification of payment directive at FERC.

(more…)

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13 September 2016

FERC files response regarding supplemental authorities in Silkman case

On August 29, FERC filed a response to Silkman’s filing of supplemental authorities (the recent decisions in the Maxim Power and City Power cases on de novo review) before the U.S. district court in Maine.  FERC’s response repeats many of the arguments it made in opposing Silkman’s request for discovery.  According to FERC, Judge Woodlock has already decided the threshold issue that was before the Maxim Power and City Power courts:  whether FERC conducted an adjudication subject to judicial review or whether a plenary trial is required.  Based on Judge Woodlock’s decision denying the motion to dismiss and transferring the case to Maine, FERC argues that it is the law of this case that FERC conducted an adjudication subject to judicial review.  According to FERC, “The Court should focus instead on the question left open by Judge Woodlock’s ruling:  how the Court will perform its review; that is, whether the Court will rule immediately after its review of the administrative record or whether its review requires supplementation of the administrative record through discovery, a hearing, or both.”  Arguing that Judge Woodlock’s prior decision is not “clearly erroneous,” FERC asserts that the decision by the Maxim Power and City Power courts to proceed in a different manner should not affect how this case proceeds.

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13 September 2016

Maxim Power files answer to FERC complaint

On September 2, Maxim Power filed its answer to FERC’s complaint in the U.S. District Court for the District of Massachusetts. As we previously reported, Judge Mastroianni issued an order denying Maxim Power’s motion to dismiss FERC’s case on July 21. Maxim Power’s answer denies many of the allegations in FERC’s complaint. Maxim Power also asserts a number of defenses, including that FERC’s complaint fails to state a claim for which relief can be granted, Maxim Power made no false statements or material omissions, the alleged misstatements are non-actionable statements containing expressions of opinion, and lack of fair notice.

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12 September 2016

BP files motion for modification of payment directive at FERC

On September 8, BP filed a  motion for modification of the payment directive in FERC’s natural gas market manipulation proceeding against BP.  As you may recall, FERC ordered BP to disgorge its unjust profits in the amount of $207,169 to the Low Income Home Energy Assistance Program (LIHEAP) of the state of Texas for the benefit of its energy consumers.  In its request for rehearing, BP sought clarification of the disgorgement, requesting that it be permitted to post a bond (under protest) during the pendency of the review proceedings.  FERC has not yet acted on the clarification, and the payment of the disgorgement is due by September 9.  Thus, BP contacted the Texas Department of Housing, the state agency that administers the LIHEAP program for Texas.  BP was informed that the Texas Department of Housing is only permitted to disburse amounts approved by the Texas legislature and is not set up to receive amounts directed by FERC.  BP has been provided with a list of charities that reportedly administer LIHEAP in Texas.  BP’s motion requests that FERC modify the payment directive to specify the charities to which BP should pay the disgorgement amount, and grant such other relief as may be warranted.

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10 September 2016

FERC settles with National Energy and David Silva

On September 1, FERC issued orders approving separate settlements with National Energy and its former employee David Silva.  The settlements involve allegations that National Energy and Silva manipulated natural gas prices at several trading hubs.  National Energy agreed to pay a civil penalty of $1.15 million and disgorgement of $305,780.  Silva agreed to pay a civil penalty of $40,000 and a one-year ban from trading in FERC-jurisdictional natural gas markets.  Considering the fact that National Energy is no longer a going concern, Enforcement recommended a downward departure from its Penalty Guidelines for the penalty against National Energy.  National Energy and Silva neither admitted nor denied the allegations.

(more…)

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