Crude Oil Futures Speculator Crooks Drive Up Oil Prices and Cause Financial Crisis

[Guest Fedup]

Lamar Alexander has received $359,975 from PACs and executives from Big Oil corporations. He is the heart of this mess.

 

Did you see that SemGroup bankruptcy trustee Roberta DeAngelis asked Tuesday for appointment of an examiner to look into the circumstances surrounding SemGroup’s trading strategy,.

 

Roberta DeAngelis was appointed Acting United States Trustee for Delaware, Pennsylvania, and New Jersey (Region 3). DeAngelis joined the U.S. Trustee Program in July 1999 as Assistant U.S. Trustee for the Newark office, after practicing bankruptcy law for 20 years.

 

The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The Program has 21 regions and 95 field offices. Region 3 is headquartered in Philadelphia, with additional offices in Wilmington, Del; Newark, N.J.; and Harrisburg and Pittsburgh, Pa.

 

You can send this information on this case via email to: USTP.Bankruptcy.Fraud@usdoj.gov

 

or by mail to:

 

Executive Office for U.S. Trustees

Criminal Enforcement Unit

20 Massachusetts Avenue, NW

Suite 8000

Washington, DC 20530

 

or contact by telephone

 

ANDREW VARA , ASSISTANT U.S. TRUSTEE

844 KING STREET, SUITE 2207

WILMINGTON, DE 19801

Phone: 302-573-6491 Fax: 302-573-6497

[Guest Stop Speculation]

Judge Brendan Shannon allowed Semgroup to use 1.1 million dollars for two week severance pay to the 250 employees the company let go last week. company officials have not revealed any information about future layoffs. SemGroup's Chapter 11 calls for the sale of "all assets." SemGroup Energy said it would distance itself from SemGroup, which is also its largest customer.

 

Over the past eight years, the Tulsa, Okla., private company bought or acquired oil pipelines, trucks and storage terminals across a swath of the oil patch stretching from east Texas to the Kansas-Nebraska border. At least 2,000 producers, big and small, sold their oil to SemGroup, which sent the crude onto refiners across the region. SemGroup filed for Chapter 11 bankruptcy protection on July 22, citing a $3.2 billion loss in the futures market.

 

http://online.wsj.com/article/SB121699348325584683.html

 

Tulsa-based BOK Financial Corp. has revised its second-quarter earnings report from a $43.7 million profit to a $1.2 million loss, citing its credit exposure to bankrupt local energy firm SemGroup LP. BOKF has a market value of approximately $3.2 billion USD

 

General Electric Corp has sued failed energy trader SemGroup LP in connection with SemGroup's alleged diversion of $54 million in pipeline funds to other corporate purposes, according to court papers filed.

 

Congress should be asking how did the NYMEX and the CFTC allow SemGroup, or anyone, to amass such a large position that it, obviously, couldn’t stand behind? What do these regulators do all day?

[Guest KaplanFox]

Kaplan Fox & Kilsheimer LLP (www.kaplanfox.com) has been investigating SemGroup Energy Partners, L.P. (“SemGroup” or the “Company”) (NYSE: SGLP) for potential violations of the federal securities laws. Investors who purchased SemGroup common stock between April 18, 2007 and March 5, 2008 may be affected.

 

A complaint has been filed against SemGroup alleging that the Company’s parent SemGroup, L.P. (the “Parent’’) was in financial difficulty or at high risk as a result of its investment in risky crude oil hedge transactions by the start of the class period, but hid this from investors in SemGroup. Rather, on or about February 20, 2008, SemGroup effected a secondary offering, (the “Offering’’) where it sold 6 million units at $23.90 for proceeds of $137 million. It also borrowed substantial funds and purchased the Parent’s asphalt business for $387 million. It is alleged that this transaction was designed to financially prop up the Parent. While the Prospectus for the Offering described the positive relationship between SemGroup and the Parent, and further described how important the Parent was to SemGroup since it was SemGroup ’s primary customer and provided almost all of the Company’s revenue, there was no discussion of the Parent’s financial difficulties or risk factors.

 

In the period following the Offering, SemGroup units traded in the $24-27 range reflecting that, as far as the investing public was aware, the Company was operating according to its business plan. However, by July 11, 2008, SemGroup unit values began to decline on increased trading volume, despite the release of no adverse news. Then on July 17, 2007 SemGroup unit prices declined 50% to $11.00 on greatly increased volume of 5.7 million units, as a result of leakage of material adverse news which had been withheld by defendants. As a result of the widespread leakage, the defendants were finally forced to issue a statement after the market closed on July 17, 2008 revealing that the Parent was experiencing liquidity issues and was exploring various alternatives, including raising additional equity, debt capital or the filing of a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.

 

If you purchased SemGroup common stock and would like to discuss our investigation, please e-mail us at mail@kaplanfox.com or contact:

 

Frederic S. Fox

Joel B. Strauss

Donald R. Hall

Jeffrey P. Campisi

Iona Evans

KAPLAN FOX & KILSHEIMER LLP

850 Third Avenue, 14th Floor

New York, New York 10022

(800) 290-1952

(212) 687-1980

Fax: (212) 687-7714

E-mail address: mail@kaplanfox.com

 

Laurence D. King

KAPLAN FOX & KILSHEIMER LLP

350 Sansome Street, Suite 400

San Francisco, California 94104

(415) 772-4700

Fax: (415) 772-4707

E-mail address: mail@kaplanfox.com

 

http://www.kaplanfox.com/signup_form.php?id=306

[Guest NCTOM]

Thomas Kivisto and his co-conspirators need prison, they and their families need to be stripped of all assets. Considering how many have been injured, the death penalty would be fairly applied.

[Guest TACOMA]

Cantwell Welcomes Progress on FTC Rulemaking to Police Oil and Gasoline Markets

 

As American consumers and businesses continue to look for relief from record high gas prices, today, U.S. Senator Maria Cantwell (D-WA) welcomed the Federal Trade Commission’s (FTC) issuance of a proposed rule explaining how the Commission plans to protect consumers from manipulation in the crude oil and wholesale petroleum markets. Cantwell was particularly pleased that the draft rule firmly embraced the legislative authority and responsibility Congress granted the FTC, and the Commission’s decision to adopt well-established regulatory tools utilized by agencies such as Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), and the Commodity Futures Trading Commission (CFTC) in preventing manipulation in other commodity markets.

 

Earlier this year, Cantwell and other members of Congress urged the FTC to expedite its use of this new regulatory responsibility to stop oil and petroleum market manipulation mandated in the 2007 Energy Bill. The Cantwell-authored legislation established that it is the responsibility of the FTC to establish clear procedures to ensure that the U.S. petroleum market is as free from manipulation as possible, and authorized the Commission to impose civil penalties of up to $1 million per violation. Utilized effectively, Cantwell believes this new authority will substantially augment consumer protections, help lower and stabilize prices, increase market transparency, and provide drivers the confidence that retail gasoline and diesel prices are free from the influence of anticompetitive practices and the exercise of market power.

 

“Today’s out of control petroleum markets can’t be explained by normal market fundamentals, and I hope that aggressive action by the Federal Trade Commission can burst the energy price bubble that is burdening American families and dragging down our economy,” said Cantwell. “Every American sees the smoke, and this proposed rule is a down payment on the fire engine we need to put out record high pump prices.”

 

Over the last several years, several major energy companies including Amaranth, Marathon Oil, and British Petroleum among others have been under federal investigation for manipulation of petroleum and natural gas markets. For example, as a result of an investigation involving British Petroleum, that company must now pay approximately $303 million for conspiring to corner the market and manipulate the price of propane carried through Texas pipelines. Similarly, in the summer of 2006, a manipulative scheme to game the natural gas market by the now defunct hedge fund Amaranth cost consumers upwards of $9 billion. In July of last year, Marathon Oil Corporation agreed to pay a $1 million fine to the Commodity Futures Trading Commission to settle charges that its Marathon Petroleum Company subsidiary attempted to manipulate crude oil prices in 2003.

 

“By establishing a clear bright line distinguishing healthy market practices from illegal manipulation, we can help restore a functional oil and gasoline marketplace where pump prices are fair and affordable. I encourage every American who believes manipulation may be behind today’s record high gasoline and diesel prices to write the Federal Trade Commission to encourage them to issue the strongest final rule possible,” said Cantwell.

 

Over the years, Cantwell has worked to increase transparency and root out manipulation in the energy markets, including helping secure anti-manipulation provisions in the Energy Policy Act of 2005 to provide Federal Energy Regulatory Commission (FERC) expanded authority over manipulation in the electricity and natural gas markets. Last December, Cantwell’s legislation banning manipulation in the oil and petroleum markets became part of the 2007 Energy Bill. During an April 8, 2008 Senate Commerce Committee hearing, Cantwell grilled FTC Commissioners about the status of the rulemaking and announced her intention to send a letter to the FTC, along with Commerce Committee Chairman Daniel Inouye (D-HI) and Senators Olympia Snowe (R-ME), Byron Dorgan (D-ND), and Gordon Smith (R-OR) asking them to aggressively and urgently implement this new responsibility. Senator Cantwell also chaired a landmark Senate Commerce Committee hearing on June 3, 2008 on the FTC’s Advanced Notice of Proposed Rulemaking.

[Luke_Wilbur]

Hedge Fund Trader Paul Eustace and Philadelphia Alternative Asset Management Co. Ordered to Pay More Than $279 Million to Defrauded Customers and More than $20 Million in Civil Monetary Penalties in CFTC Action

 

The U.S. Commodity Futures Trading Commission (CFTC) today announced that Paul Eustace of Ontario, Canada, was ordered to pay more than $279 million in restitution and a $12 million civil penalty, based on an order that resolves a CFTC enforcement action against him for defrauding commodity pool participants in four pools that he managed.

 

The court also entered an order of default judgment against the commodity pool operator that Eustace controlled, the Philadelphia Alternative Asset Management Co. (PAAM), imposing permanent trading and registration bans, requiring payment of restitution of approximately $276 million, subject to offset by prior disbursements and payments by Eustace, and imposing an $8.8 million civil monetary penalty.

 

The supplemental consent order, entered by the Hon. Michael M. Baylson of the U.S. District Court for the Eastern District of Pennsylvania on August 13, 2008, follows a July 13, 2007 consent order of permanent injunction against Eustace that enjoins Eustace from further violations, and imposes permanent trading and registration bans.

 

“This concludes a successful effort by our Division of Enforcement to stop fraud in its tracks, return as much money as possible to defrauded investors, and to bring wrongdoers to justice,” said CFTC Acting Chairman Walter Lukken.

 

The orders arise out of a CFTC complaint filed on June 21, 2005, and later amended, against Eustace and PAAM. (See CFTC Press Release 5091-05, June 29, 2005.)

 

At the outset of the litigation, the CFTC’s action froze all the assets under the control of PAAM and Eustace and preserved more than $70 million for return to pool participants. The CFTC also obtained the appointment of a receiver to recover and distribute funds to defrauded participants. Through related receivership litigation, an additional $96 million has been obtained to date for the benefit of defrauded pool participants. Defendants’ restitution obligation shall be offset by any funds distributed through the receivership.

 

As alleged in the amended complaint, and as the 2007 consent order found, from at least the spring of 2001 through June 2005, Eustace fraudulently operated four commodity pools: the Option Capital Fund LP (Option Capital Fund); and, through PAAM, the Philadelphia Alternative Asset Fund, L.P. (LP Fund); the Philadelphia Alternative Feeder Fund LLC; and the Philadelphia Alternative Asset Fund, Ltd., an offshore fund with over $250 million in assets. During this time, Eustace incurred losses of approximately $200 million trading commodity futures and options either in accounts held in the name of the funds or in his name. Eustace concealed those losses by issuing or causing to be issued, false account statements reflecting highly and consistently profitable trading results. Eustace also misappropriated assets of the Option Capital and LP Funds and received incentive and management fees through his fraudulent operation of the pools. Eustace was also charged with fraudulent solicitation and registration violations.

 

In December 2007, the CFTC issued a related order filing and settling failure to supervise and recordkeeping charges against MF Global, Inc. (MFG), a registered futures commission merchant, and Thomas Gilmartin, a former associated person of MFG relating to their mishandling of certain trading accounts managed by Eustace and PAAM that sustained losses of approximately $133 million. MFG and Gilmartin paid collectively $2.25 million in civil monetary penalties and Gilmartin agreed never to seek registration with the Commission. (See CFTC Press Release 5427-07, December 26, 2007.)

 

The following CFTC Division of Enforcement staff members are responsible for this case: Gretchen L. Lowe, Michael J. Otten, Kara Mucha, Glenn I. Chernigoff, Richard B. Wagner, and Vincent McGonagle.

 

 

UNITED STATES OF AMERICA V. PAUL EUSTACE

 

VIOLATION: 7 U.S.C. §§6o, 13(a)(2) (commodities fraud-2 counts)

 

The Option Capital Fund LLC (Option Capital Fund) was a commodity pool which traded primarily commodity futures and options. Defendant PAUL EUSTACE was the General Partner and operator of the Option Capital Fund, over which he exercised complete control. Defendant EUSTACE did not register as required with the CFTC as a commodity pool operator for this fund.

 

The Philadelphia Alternative Asset Management Company, LLC (PAAM), located in King of Prussia, Pennsylvania and Canada was formed by defendant PAUL EUSTACE, and Persons #1, #2 and #3, known to the grand jury. PAAM was registered with the CFTC as a commodity pool operator. Defendant EUSTACE, who was the President and principal trader for PAAM, was registered with the CFTC as an associated person of PAAM. Defendant EUSTACE conducted his trading on behalf of PAAM out of Canada. The administrative functions were often handled by the King of Prussia office, including sending out statements and correspondence to investors throughout the United States and abroad in accordance with defendant EUSTACE’s instructions.

 

The Philadelphia Alternative Asset Fund, LP (LP Fund), was established by PAAM and defendant PAUL EUSTACE to trade commodity futures and options contracts. PAAM was the General Partner of the LP Fund. Defendant PAUL EUSTACE, who was the trader of the LP Fund, was the only individual authorized signatory on LP Fund bank accounts, and he had exclusive control over the assets and trading of the LP Fund.

 

The Philadelphia Alternative Asset Fund, Ltd. (Off -Shore Fund) was established by PAAM and defendant PAUL EUSTACE. The Off-Shore fund, which was based in the Cayman Islands, traded commodity futures and options on U.S. futures exchanges. The Off-Shore Fund also traded foreign currencies and engaged in the exchange of futures for physicals (FEP trades). Defendant PAUL EUSTACE conducted trades, or directed the conducting of trades, for the Off-Shore Fund, and had control of all of the Off-Shore Fund’s trading accounts.

 

The Philadelphia Asset Feeder Fund LLC (Feeder Fund) was established by PAAM and defendant PAUL EUSTACE for the purpose of allowing investors in the United States to participate in the Off-Shore Fund, which they otherwise would have been prohibited from doing as a result of regulatory constraints. The Feeder Fund did not maintain any trading accounts in its own name.

 

MAN Financial Inc. (MAN) is a futures commission merchant. Person #1 was employed by MAN. Defendant PAUL EUSTACE opened several accounts in the name of the Off-Shore Fund at MAN, including but not limited to the “10 account” and the “50 account.” Defendant had sole trading authority over these accounts. The third party administrator of the Off-Shore Fund had internet access to information concerning the “10 account” but not to the “50 account.”

 

UBS Securities, LLC (UBS Securities) is also a futures commission merchant. Defendant PAUL EUSTACE opened one account in the name of the Off-Shore Fund at UBS Securities. Defendant had control of trading in this account.

 

UBS Fund Services (Cayman) Ltd. (UBS Cayman) was the administrator of the Off-Shore Fund. UBS Cayman prepared statements for investors in the Off-Shore Fund (Net Asset Value statements), primarily relying on Off-Shore Fund account information that UBS Cayman accessed through web sites and computer systems maintained by MAN and UBS Securities. Defendant PAUL EUSTACE usually also sent investors in the Off-Shore Fund a statement based on the same information from MAN and UBS Securities, which meant that investors in the Off-Shore Fund would receive two statements for the same reporting period, one from UBS Cayman and one from defendant EUSTACE.

 

Defendant PAUL EUSTACE also caused correspondence and statements pertaining to the performance of funds under his control to be sent to investors, including individual investors in the Off-Shore Fund and the Feeder Fund, from PAAM’s offices in King of Prussia, Pennsylvania.

 

From at least Spring 2001 through in or about June 2005, in the Eastern District of Pennsylvania and elsewhere, defendant knowingly employed a scheme to defraud clients and participants, and prospective clients and participants of the Option Capital Fund, the LP Fund, the Off-Shore Fund and the Feeder Fund, causing losses to these victims of at least $200 million.

 

Defendant PAUL EUSTACE fraudulently induced investors to participate or increase their investment in commodity pools for which he was the commodity pool operator or associated person, and induced existing investors to continue to participate in these commodity pools, by failing to disclose material facts concerning these commodity pools, and by issuing or causing to be issued account statements which made it appear that the funds under his control were profitable, when in fact they were sustaining losses.

 

As a result of defendant PAUL EUSTACE’s fraudulent actions in making the funds appear profitable when they were actually losing money, defendant EUSTACE greatly increased the amount of fees he received. Management fees were based upon the amount of assets under defendant EUSTACE’s control, and by attracting and retaining more money in the funds under his control, defendant EUSTACE also increased the fees he received. Also, because defendant EUSTACE received a percentage of the increase in value of the funds under his control, he received additional fees as the funds reported greater profits.

 

From in or about Spring 2001 through in or about June 2005, defendant PAUL EUSTACE solicited at least $4 million from at least 12 investors for Option Capital Fund. Defendant EUSTACE defrauded investors and potential investors in the Option Capital Fund by:

 

a. failing to disclose his losing investment track record to investors and potential investors, and/or by affirmatively telling investors and potential investors that funds under his management had been profitable, when in fact those funds had suffered significant losses;

 

b. issuing statements to investors from in or about March 2003 through in or about June, 2005, which indicated that the Option Capital Fund was profitable, when defendant PAUL EUSTACE knew that (1) the fund was not profitable as indicated on statements sent to investors; and (2) defendant EUSTACE had closed all of Option Capital Fund’s trading accounts in or about March 2003;

 

c. failing to inform investors that defendant PAUL EUSTACE had:

 

(1) made loans to himself using the funds which belonged to the investors in the Option Capital Fund;

(2) transferred money belonging to investors in the fund to his personal accounts; and

(3) used approximately $500,000 belonging to investors in the fund to pay a settlement in a legal case which defendant EUSTACE knew should not have been charged to the fund.

 

From in or about Fall 2002 through in or about June 2005, defendant PAUL EUSTACE solicited at least $28 million from at least 10 investors for the LP Fund. Defendant EUSTACE defrauded investors and potential investors in the LP Fund by:

 

a. fraudulently providing investors and potential investors of the LP Fund information that indicated that the Option Capital Fund had been profitable, when defendant PAUL EUSTACE knew that the Option Capital Fund had not achieved the results he claimed.

 

b. sending fictitious statements to investors between Fall 2002 and May 2005, which falsely stated that the value of investor’s LP Fund investments had increased due to profitable trading of commodity futures and options, when defendant PAUL EUSTACE knew that the LP Fund had not achieved the results he claimed.

 

c. failing to disclose to investors and potential investors that no trading was ever done in the name of the LP Fund, and that all monies invested in the LP Fund were placed in accounts in the name of the Option Capital Fund or in defendant PAUL EUSTACE’s personal accounts.

 

d. failing to disclose the existence of the LP Fund for the first six months of an audit of PAAM by the NFA.

 

From in or about June 2004 through in or about June 2005, defendant PAUL EUSTACE solicited at least $250 million from at least 60 investors for the Off-Shore and Feeder Funds. Defendant EUSTACE defrauded investors and potential investors in these funds by:

 

a. fraudulently providing investors and potential investors of the Off- Shore and Feeder Funds information that falsely indicated that the Option Capital Fund and the LP Fund had consistently profitably traded commodity futures and options, when defendant PAUL EUSTACE knew that the Option Capital Fund and LP Fund had not achieved the results he claimed.

 

b. fraudulently causing, at various times, USB Cayman, the fund administrator, to receive incorrect information concerning the time and/or date that certain EFP trades took place. Defendant PAUL EUSTACE caused this false information to be conveyed to UBS Cayman through Person #1, who was employed at MAN where many of the Off-Shore Fund’s trading accounts were maintained, or by other means. By altering the time and/or date of these EFP trades, defendant EUSTACE made it appear that the Off-Shore Fund was profitable in certain reporting periods when, if the timing of the trades had been correctly stated, statements to investors would have shown losses in those same reporting periods.

 

c. fraudulently failing to disclose, or denying the existence of the “50 account” at MAN. From approximately March 2005 through June 2005, defendant PAUL EUSTACE used the “50 account” as a secret account which could only be accessed on the internet by defendant PAUL EUSTACE.

 

d. fraudulently causing losing trades to appear in the “50 account,” while profitable trades were placed in the “10 account.” Because defendant PAUL ESTACE had hidden the existence of the “50 account” at MAN from UBS Cayman, the fund administrator, and UBS Cayman did not have internet access to the “50 account,” these actions of defendant EUSTACE resulted in UBS Cayman receiving reports from MAN only on the profitable trades in the “10 account,” but not the losing trades in the “50 account.”

 

fraudulently causing UBS Cayman to issue NAV statements to the investors in the Off-Shore Fund which defendant PAUL EUSTACE knew incorrectly informed investors that the Off-Shore, and therefore the Feeder Fund had been profitable, when defendant EUSTACE knew that:

 

(1) UBS Cayman did not know of the secret “50 account,” as defendant EUSTACE had blocked UBS from internet access to that account; and

(2) UBS Cayman did not know that the Off-Shore Fund had massive losses which were hidden in the “50 account.”

 

f. fraudulently sending or causing letters and statements to be sent to investors from PAAM’s offices in King of Prussia to investors in the United States and abroad by facsimile machine, which made it appear that the Off-Shore Fund and Feeder Fund were profitable, when, as defendant PAUL EUSTACE well knew, these funds had sustained trading very substantial losses.

 

As of June 2005, accounts in commodity pools under the control of defendant PAUL EUSTACE had sustained heavy losses: The combined loss in the Option Capital and LP Fund was approximately $22 million; the combined loss in the Off-Shore and Feeder Funds was approximately $180 million. Total losses to investors as a result of defendant EUSTACE’s fraudulent activity were therefore approximately $202 million.

 

Here is more evidence that some crooked market manipulators not only hurt consumers, they hurt investors and employees as well.

[Guest Jesselee]

Here is another good story about speculator crooks

 

The U.S. District Court for the Southern District of New York entered four default orders against nine defendants: New York Options Exchange (NYOEX), Tahoe Futures (Tahoe), International Energy Exchange (INTENX), Vitol Capital Management (Vitol),New York Petroleum Option Exchange (NYPOE), HPR Commodities (HPR), American Futures and Options Exchange (AFOEX), Metro Financials (Metro), and American Futures and Options Trading Commission (AFOTC). The orders require that the defendants pay a total of $13,834,957.21 in restitution to victims of their fraud and impose civil monetary penalties totaling $1,690,000. The orders find that the defendants, through misrepresentations on their websites, defrauded customers out of millions of dollars.

 

The four orders for default judgment resolve charges against the nine defendants arising from the CFTC’s complaints in CFTC v. New York Options Exchange, et al., 07 CV 2376 (S.D.N.Y.), CFTC v. American and Futures Options Exchange, et al., 07 CV 2377 (S.D.N.Y.), CFTC v. International Energy Exchange et al., 07 CV 2378 and CFTC v. New York Option Exchange et. al., 07 CV 2379 (S.D.N.Y.)

 

Specifically, the orders find that in each of the cases, customers were solicited to trade commodity futures and/or options in commodities, such as energy and currency. Customers were duped into believing that: (1) NYOEX, INTENX, NYPOE, and AFOEX were futures exchanges; (2) Tahoe, Vitol, HPR, and Metro were their respective brokers; and (3) all these entities were located in the United States. Customers were promised substantial profits when, in fact, customers lost nearly all of the money they invested – a total of more than $13,834,957.21, according to the orders.

 

The Creation of a Fictitious Regulator was Part of the Scam

 

Metro fraudulently solicited customers to purchase options on futures contracts purportedly traded on AFOEX, an exchange which claimed to be regulated by AFOTC — the purported sole regulator in the United States for the commodity futures and option markets when, in fact, AFOTC, like Metro and AFOEX, is a fictitious entity with its own fraudulent website.

 

In addition to imposing restitution and civil monetary penalties, the orders enter permanent injunctions against all defendants that prohibit them from engaging in any business activities related to commodity futures and options trading.

 

The CFTC wishes to thank the Australian Securities and Investments Commission, the German Bundesanstalt für Finanzdienstleistungsaufsicht, the Hong Kong Securities and Futures Commission, the Swiss Federal Banking Commission, the Malaysian Securities Commission, the Monetary Authority of Singapore, the Czech National Bank, the Securities and Exchange Board of India, the Italian Commissione Nazionale per le Società e la Borsa, the Autoriteit Financiële Markten of the Netherlands, the New York Mercantile Exchange, and the Office of Investor Education and Assistance, and the U.S. Securities and Exchange Commission for their assistance.

 

The following CFTC Division of Enforcement staff members are responsible for this case: David Oakland, Philip Rix, Nathan Ploener, Manal Sultan, Lenel Hickson, and Stephen J. Obie.

 

Note to Media: Defendants Tahoe, Vitol, and HPR are unrelated to Tahoe Futures LLC located in New York, New York; Vitol Capital Management Ltd. located in Houston, Texas; and HPR Commodities LLC located in New York, New York.

[Guest Fed Up]

This is so amazing. I was just reading David Cho's article about Vitol for the Washington Post. When is Congress going to wise up.

 

http://www.washingtonpost.com/wp-dyn/conte...8082003898.html

 

Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.

 

But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.

 

The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.

 

The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders.

 

There is more to the article. This is just another example how the few control the many.

[Guest Aadarshini]

Oh well... American Idol watching Americans will still want to "Drill here, Drill now" as a solution, and oil companies have their rag doll John McCain to prey on the ignorance of people to accomplish their long awaited dream.

[Guest Professional Bastard]

It really is amazing that some of the same people that fight so hard for rampant speculation are also firmly against legalizing gambling.

[Guest Fed Up]

Oh well... American Idol watching Americans will still want to "Drill here, Drill now" as a solution, and oil companies have their rag doll John McCain to prey on the ignorance of people to accomplish their long awaited dream.

 

Americans can thank John McBush's economic guru, Phil Graham, for single-handedly wrecking our financial system to the ground. This sack of human garbage belongs in prison.

[Luke_Wilbur]

I put up a consumer advisory warning of phony futures and options websites on WashDC.

 

http://www.washdc.com/phony-futures-and-options-websites

 

The scams all appear to operate in a similar fashion. A fraudulent website claiming to be a registered commodity broker solicits potential customers to invest in futures or options. The website also directs the potential customer to another fraudulent website claiming to be the Federal agency responsible for the oversight of the U.S. commodity markets. Once the customer agrees to invest, the broker directs the customer to open an account with a fictitious exchange, which falsely claims to be regulated by the United States government. The fictitious exchange then directs the customer to wire funds to a bank account for trading. Customers are led to believe that they have opened online trading accounts with the exchange when, in fact, their funds have been misappropriated.

The websites are slick and professional looking, and the scams are particularly convincing because they appear to offer investors the assurances of industry and U.S. Federal government oversight. The websites even go so far as to allow potential investors to search regulator databases for registration status and to file complaints.

 

The CFTC warns investors to do independent research before sending funds to a commodity firm. The official websites for the CFTC, the National Futures Association (the self-regulatory organization for the U.S. commodity industry), and the International Organization of Securities Commissions are:

 

Commodity Futures Trading Commission (CFTC). Our website is at http://www.cftc.gov/. You'll find contact information for us on the CFTC website.

 

National Futures Association (NFA). The Federal commodities laws require that virtually every commodity firm doing business with the U.S. public must be a member of the National Futures Association. You’ll find information on how the NFA registers and governs its member firms on its website at http://www.nfa.futures.org/. You can also check registration status of NFA member firms at the NFA website.

 

International Organization of Securities Commissions (IOSCO). You'll find a list of international regulators on the International Organization of Securities Commissions website at http://www.iosco.org/.

[Bluto]

Mad Max was a movie way before its time.

[Guest Fed Up]

Mad Max could be our future. But, I think when high ranking foreign oil ministers such as Ali al-Naimi of Saudi Arabia point out there is not any shortage!!! A free market isn't free when you're getting robbed blind legally.

 

Greedy futures traders and investors get rich by juggling imaginary money until it falls in their favor. This smoke and mirrors game is very hurtful to the economy but very profitable for them. The Democratic Congress has taken up numerous bills over the summer months in order to address the rampant oil speculation that has driven up prices. However, each of these legislative efforts has been blocked by President Bush and the Republican leadership in Congress.

 

 

The commodity market has created “paper oil” causing gasoline prices to be distorted and Congress needs to deal with it. - U.S. Rep. Mike Ross (D-Ark.)

[Guest EnronEx]

This is so amazing. I was just reading David Cho's article about Vitol for the Washington Post. When is Congress going to wise up.

There is more to the article. This is just another example how the few control the many.

 

The question of whether Oil trader, Vitol has amassed futures contracts equal to 57.7 million barrels of oil by June 6, valuing the holdings at nearly $8 billion that day is. Here is statement released by the company.

 

Statement in Response to the Washington Post article of 21st August 2008

 

The article states that "by June 6...Vitol had acquired a huge holding in oil contracts, betting prices would rise. The contracts were equal to 57.7 million barrels of oil." It goes on to say that crude prices spiked $11 that day.

 

This description of Vitol's position and its implied relation to oil price movements is fundamentally incorrect.

 

The Vitol Group's net crude futures position on the main international exchanges on 6th of June was in fact short eleven million barrels. This short position reflects the Group's extensive use of the exchanges for managing price risk on the physical oil it supplies, as is standard practice throughout the oil industry.

 

Here is an excerpt of the May 25, 2008 Sunday Times article "Trader lands £100m betting on oil prices."

 

http://business.timesonline.co.uk/tol/busi...icle3998971.ece

 

A trader has made an estimated £100m from gambling on the rise in oil prices. Andrew Serotta made the killing for his employer Vitol, a Swiss trading company, when he bought 40,000 oil futures contracts nine months ago.

 

The American, who divides his working life between Geneva and Houston, Texas, is one of many savvy traders profiting from – and some say fuelling – the soaring price of oil, which last week touched $135 a barrel and is expected to force the price of petrol at the pumps in Britain to 116p a litre.

 

“We just watched, thinking they were going to get run over,” said one rival Houston-based trader of Serotta’s purchase. “To a bystander it looked crazy.”

 

In July last year, the price of a barrel of oil was hovering at about $70. Almost everyone expected the price to fall during 2008 to around $60 a barrel, but Serotta bought 40,000 futures contracts linked to a price of $80 a barrel.

 

Here is Vitol's response:

 

The Editor

The Sunday Times

London

 

Dear Sir,

Your article of 25 May 2008 by Robert Watts and Iain Dey contains many factual errors with regard to Vitol SA and, in particular, Mr. Andy Serotta, a trader based in Houston Texas and employed by Vitol Capital Management Ltd, an affiliate, who is responsible for trading in the financial energy markets.

 

Contrary to your statements, Mr. Serotta has never visited the Geneva office, and he does not take speculative oil positions, an activity that is inconsistent with Vitol Capital Management’s policies. The trading activity and profits attributed to Mr. Serotta as stated in your article are based on faulty assumptions and are entirely inaccurate.

 

Vitol is not in the business of taking large positions speculating on the rise or fall of market prices, and Mr. Serotta did not trade speculatively on the direction of crude oil prices. Vitol’s business model includes moving physical oil in the global market, identifying global arbitrages in location, timing and quality, and using sophisticated hedging to manage market risk.

 

Further, despite your claims, Vitol is not interested in supporting higher oil prices. Vitol would prefer a much lower price for reasons of working capital requirements and overall credit control.

 

Yours faithfully,

David Fransen

Managing Director

Vitol SA

 

 

Recently, the the Dubai Mercantile Exchange (DME) has enlisted Vitol as new co-owner to help it attract liquidity. Vitol currently has a majority stake in the Fujairah Refinery Company Limited which has refining and storage assets in the Emirate of Fujairah (UAE), on the Indian Ocean, just south of the Straits of Hormuz. The refinery had been mothballed since 2003, and following maintenance work is now running at around 20,000 barrels per day. There is still additional land to expand and further investments are being considered. The Vitol Group regularly ships over four million barrels of physical crude oil and petroleum products each day to international markets.

 

Vitol also owns 10% of the Vitol Horizon Fujairah Limited terminal, which is strategically located outside the Straits of Hormuz. Officially opened in 1999, Vitol has continued to invest along with its joint venture partners to boost storage capacity to 1,100,000m3. The VHFL terminal incorporates a trestle-type jetty extending more than 1.5km into the sea, providing a class-leading draft of 18m, as well as a SPM capable of handling Suezmax ships.

 

People should investigate the relationship between Andrew Serrota and SITE Capital Management.

 

Formed in 1994, SITE Capital Management LLC specializes in trading directional and market-neutral equity strategies centered around stock indices. Using sophisticated statistical computer modeling, SITE achieves superior risk-adjusted returns by trading stock index futures, options on futures, stock index options, and equity baskets. SITE's returns are uncorrelated to the market, and portfolio risk is monitored with resepect to both adverse market moves and changes in market volatility. SITE trades proprietary capital and is closed to outside investment.

 

SITE Capital Management LLC

46 Murray Hill Road

Scarsdale, NY 10583-3417

United States

Phone: 914-725-0440

Fax: 914-725-0642

[Guest Go Figure]

Gas prices go up dollar goes down. Gas prices go down dollar goes up.

[Raven]

Gas prices go up dollar goes down. Gas prices go down dollar goes up.

I will agree with that considered that gas prices has drop by almost seventy cents in the last week.

But I do have a feeling that right after Labor Day they will rise drastically.

[Guest LAW_*]

CFTC Sanctions Former NYMEX Broker Ryan Tremblay $50,000 for Fraudulent Trade Practice Scheme

 

Washington, DC − The U.S. Commodity Futures Trading Commission (CFTC) announced today that it settled charges against former New York Mercantile Exchange (NYMEX) broker Ryan Tremblay of Ramsey, New Jersey, for fraudulently allocating trades to his personal account and depriving customers of the opportunity to profit. The CFTC’s order, entered on August 28, 2008, requires Trembay to pay a $50,000 civil monetary penalty and permanently prohibits him from trading in the commodities markets for or on behalf of any other person or entity.

 

This CFTC action resulted from a joint CFTC cooperative enforcement investigation, with the New York County District Attorney’s Office (NYCDAO), of abusive trading practices on the NYMEX. The CFTC charged Tremblay, formerly registered as a floor broker, with diverting profitable transactions to his own account that had been filled for customers.

 

In the related criminal matter, Tremblay pled guilty on June 12, 2008, to the misdemeanor state crime of attempting to violate the anti-fraud provision of New York’s General Business Law for the same underlying conduct and received a sentence of a conditional discharge.

 

The CFTC would like to thank the NYCDAO and the NYMEX compliance staff for their assistance with the investigation.

 

The following CFTC Division of Enforcement staff were responsible for this case: Judith Slowly, Philip Rix, Sheila Marhamati, Steven Ringer, Lenel Hickson and Vincent McGonagle. In addition, Young Hwan Byeon, an Economist from the Korean Financial Supervisory Service, assisted in this matter.

[Guest BS]

You are actually more correct than you might imagine. Another piece of the Carlyle portfolio has crashed. SemGroup LP (the 12th-largest private U.S. company) suspended its co-founder and chief executive Thomas Kivitso and was forced to recognize $2.4 billion in losses on NYMEX crude oil futures when it transferred its trading position to Barclays Plc (BARC.L).

 

SemGroup told investors its operating cash flow could reach $600 million this year before the cost of hedging its physical oil trading business which bought or sold more than 500,000 barrels of oil a day. SemGroup had large “short” positions on crude-oil contracts, which were essentially bets that oil prices would fall. As part of its business, SemGroup uses these contracts — which commit the company to sell oil at fixed prices at future dates — to hedge its inventory and future oil purchases.

 

"Rather than simply engaging in prudent hedging strategies that somehow went awry, the debtors were speculating with the lenders' collateral, employing unauthorized option trading strategies in violation of the debtors' own (woefully inadequate) risk management policies and in violation of numerous covenants under the credit agreement,” the filing Wednesday said.

 

Some creditors suggest the possibility that fraudulent trades may have caused the collapse. A conflict of interest was spotted when it was found that $290 million is owed to SemGroup shareholders by Thomas Kivitso's personal trading company.

Hopefully shareholders will read this post before the September class action lawsuit deadline.

The Tulsa, Oklahoma-based company filed for bankruptcy after suffering $3.2 billion in losses on energy futures and derivatives trades that SemGroup says were designed to protect its physical oil trading business.

Congress should pay close attention to the following cases.

 

SEMCRUDE, L.P., 08-11525

 

7/22/2008 0811525-001 0001 SemCrude, L.P.

7/22/2008 0811526-001 0001 Chemical Petroleum Exchange, Incorporated

7/22/2008 0811527-001 0001 Eaglwing, L.P.

7/22/2008 0811528-001 0001 Grayson Pipeline, L.L.C.

7/22/2008 0811529-001 0001 Greyhawk Gas Storage Company, L.L.C.

7/22/2008 0811530-001 0001 K.C. Asphalt, L.L.C.

7/22/2008 0811531-001 0001 SemCanada II, L.P.

7/22/2008 0811532-001 0001 SemCanada, L.P.

7/22/2008 0811533-001 0001 SemCrude Pipeline, L.L.C.

7/22/2008 0811534-001 0001 SemFuel Transport, L.L.C.

7/22/2008 0811535-001 0001 SemMaterials Vietnam, L.L.C.

7/22/2008 0811536-001 0001 SemGas Gathering, L.L.C.

7/22/2008 0811537-001 0001 SemKan, L.L.C.

7/22/2008 0811538-001 0001 SemFuel, L.P.

7/22/2008 0811539-001 0001 SemManagement, L.L.C.

7/22/2008 0811540-001 0001 SemGas Storage, L.L.C.

7/22/2008 0811541-001 0001 SemMaterials, L.P.

7/22/2008 0811542-001 0001 SemGas, L.P.

7/22/2008 0811543-001 0001 SemTrucking, L.P.

7/22/2008 0811544-001 0001 SemGroup Asia,

7/22/2008 0811545-001 0001 SemStream, L.P.

7/22/2008 0811546-001 0001 Steuben Development Company, L.L.C.

7/22/2008 0811547-001 0001 SemGroup, L.P.

7/22/2008 0811548-001 0001 SemOperating G.P., L.L.C.

 

Someone should also compare the dates of Semgroups "Short Bets" with the days gas prices went down. This will become the next big "Enron" story with some of the same players behind the scenes getting away once again.

 

Who benefited from the proceeds of the stolen oil? Many of SemGroup’s trading counterparties and their bankers I would suggest.

[Guest Enron Ex]

Who benefited from the proceeds of the stolen oil? Many of SemGroup’s trading counterparties and their bankers I would suggest.

 

I am sure SemGroups’ bankers knew there was trouble well before the filing.

[Guest LAW_*]

There is currently and investigation planned on BOK chairman and Tulsa oilman George Kaiser, who made a $188 million loan to Semgroup.

[Guest James Stedland]

Gas prices go up dollar goes down. Gas prices go down dollar goes up.

 

The price of Gas has risen far more than the dollar has fallen.

[Guest Bill Harold]

It seems that market design for oil futures (which is one of the most crucial commodities) allows easy manipulation which is not so easy to catch.

 

I am talking about "wash sales". Someone who has open long position (or oil producer) can establish Companies A and B on NYMEX. Company A wants to sell oil for $141 when the price is $140. Nobody is buying except company B which agrees to buy for $141. Then Company B wants to sell it for $142. Company A buys it. Both companies effectively closed their positions. No oil changed hands. Price is now $142 instead of $140.

 

The real problem is that large institutional investors like Vitol are still able to conduct trades on the Intercontinental Exchange, which has one of its headquarters in Winnipeg, outside of the regulated market.

[Guest Victor]

Increased liquidity in the oil markets has given futures speculators the ability to move greater and greater amounts of money and to thereby exert greater and greater influence on markets.

[Guest Maxed]

Bank of America called for a bankruptcy judge to appoint an examiner to oil futures trading by Semgroup. This story is simular to the fall of Barings Bank, where its trader Nick Leeson and the infamous "account 88888." The bank didn't know it was history until Leeson wrote a note saying, "Sorry" and took off on the lam.

 

 

You are actually more correct than you might imagine. Another piece of the Carlyle portfolio has crashed. SemGroup LP (the 12th-largest private U.S. company) suspended its co-founder and chief executive Thomas Kivitso and was forced to recognize $2.4 billion in losses on NYMEX crude oil futures when it transferred its trading position to Barclays Plc (BARC.L).

 

SemGroup told investors its operating cash flow could reach $600 million this year before the cost of hedging its physical oil trading business which bought or sold more than 500,000 barrels of oil a day. SemGroup had large “short” positions on crude-oil contracts, which were essentially bets that oil prices would fall. As part of its business, SemGroup uses these contracts — which commit the company to sell oil at fixed prices at future dates — to hedge its inventory and future oil purchases.

 

"Rather than simply engaging in prudent hedging strategies that somehow went awry, the debtors were speculating with the lenders' collateral, employing unauthorized option trading strategies in violation of the debtors' own (woefully inadequate) risk management policies and in violation of numerous covenants under the credit agreement,” the filing Wednesday said.

 

Some creditors suggest the possibility that fraudulent trades may have caused the collapse. A conflict of interest was spotted when it was found that $290 million is owed to SemGroup shareholders by Thomas Kivitso's personal trading company.

Hopefully shareholders will read this post before the September class action lawsuit deadline.

The Tulsa, Oklahoma-based company filed for bankruptcy after suffering $3.2 billion in losses on energy futures and derivatives trades that SemGroup says were designed to protect its physical oil trading business.

Congress should pay close attention to the following cases.

 

SEMCRUDE, L.P., 08-11525

 

7/22/2008 0811525-001 0001 SemCrude, L.P.

7/22/2008 0811526-001 0001 Chemical Petroleum Exchange, Incorporated

7/22/2008 0811527-001 0001 Eaglwing, L.P.

7/22/2008 0811528-001 0001 Grayson Pipeline, L.L.C.

7/22/2008 0811529-001 0001 Greyhawk Gas Storage Company, L.L.C.

7/22/2008 0811530-001 0001 K.C. Asphalt, L.L.C.

7/22/2008 0811531-001 0001 SemCanada II, L.P.

7/22/2008 0811532-001 0001 SemCanada, L.P.

7/22/2008 0811533-001 0001 SemCrude Pipeline, L.L.C.

7/22/2008 0811534-001 0001 SemFuel Transport, L.L.C.

7/22/2008 0811535-001 0001 SemMaterials Vietnam, L.L.C.

7/22/2008 0811536-001 0001 SemGas Gathering, L.L.C.

7/22/2008 0811537-001 0001 SemKan, L.L.C.

7/22/2008 0811538-001 0001 SemFuel, L.P.

7/22/2008 0811539-001 0001 SemManagement, L.L.C.

7/22/2008 0811540-001 0001 SemGas Storage, L.L.C.

7/22/2008 0811541-001 0001 SemMaterials, L.P.

7/22/2008 0811542-001 0001 SemGas, L.P.

7/22/2008 0811543-001 0001 SemTrucking, L.P.

7/22/2008 0811544-001 0001 SemGroup Asia,

7/22/2008 0811545-001 0001 SemStream, L.P.

7/22/2008 0811546-001 0001 Steuben Development Company, L.L.C.

7/22/2008 0811547-001 0001 SemGroup, L.P.

7/22/2008 0811548-001 0001 SemOperating G.P., L.L.C.

 

Someone should also compare the dates of Semgroups "Short Bets" with the days gas prices went down. This will become the next big "Enron" story with some of the same players behind the scenes getting away once again.