New York, NY – August 4, 2014 – Crude oil trader James T. Dyer, along with several companies and a co-trader, has been penalized $13 million by the U.S. Commodity Futures Trading Commission (CFTC) for manipulating crude oil futures contracts. The settlement, entered on August 4, 2014, in the U.S. District Court for the Southern District of New York, concludes a case alleging manipulative trading practices between January 2008 and April 2008.
The CFTC’s complaint accused Dyer, along with Parnon Energy Inc., Arcadia Petroleum Ltd., and Arcadia Energy (Suisse) SA, of manipulating New York Mercantile Exchange (NYMEX) Light Sweet Crude Oil futures contract spreads. The alleged scheme involved accumulating a dominant position in physical West Texas Intermediate (WTI) crude oil, holding it until after futures expiry, and then selling it off rapidly during the “cash window” – a period of intense trading – at a loss.
According to the CFTC, this strategy was designed to artificially widen futures spreads, allowing the defendants to profit by buying spreads before the manipulation and selling them after. Dyer and Nicholas J. Wildgoose, the other trader named in the complaint, are alleged to have directed the manipulative trading activity. The defendants reportedly exploited a tight physical market to execute their plan.
In addition to the $13 million civil monetary penalty, the consent order imposes restrictions on Parnon’s physical market trading for three years. The companies are also required to maintain detailed records and audio recordings for three years and to engage an independent consultant to review and improve their compliance, internal controls, and risk management procedures.
“Through resolution of this litigation, the CFTC is holding accountable market participants who sought to profit by undermining the integrity of the U.S. crude oil markets,” stated CFTC Director of Enforcement Aitan Goelman. “The CFTC will continue to work to ensure the integrity of the markets we are responsible for protecting from manipulation, whether direct or indirect.”
The case was led by CFTC staff members including Christine Ryall, Elizabeth Davis, and Jonathan Robell, among others. The investigation focused on trading activity surrounding the May/June 2008 spread, alleging attempted manipulation during April 2008.
Source: CFTC.gov
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