Hunter Bemoans FERC Suit

Date: Wednesday, August 8, 2007
Author: HFN Daily Report

Former Amaranth trader Brian Hunter is complaining a suit by the Federal Energy Regulatory Commission could derail his new firm.

Hunter was the man behind the $6 billion loss Amaranth experienced in the course of about a week last September. He has since been charged by both FERC and the Commodity Futures Trading Commission with attempting to manipulate the natural gas futures market.

In a formal declaration filed in a federal court in Washington, D.C., Hunter pleaded for an injunction against FERC, claiming its enforcement action would cause him irreparable harm. Specifically, Hunter is afraid the agency's actions might sink Solengo Capital Advisors, a hedge fund firm founded by Hunter which he 60% owns.

Based in Hunter's home town of Calgary, Solenga employs 11 people. The firm had hoped to launch its first fund this summer, but since the FERC action, Solengo has begun to "disintegrate," according to Hunter.

"FERC's pursuit of its enforcement action has paralyzed Solengo Capital Advisors' business," Hunter complained.

While the CFTC's action against Hunter alleges only attempted market manipulation, FERC is charging him with actual manipulation and is seeking $30 million in civil penalties. Hunter said the prospects of a large judgment followed by civil suits from investors is making it "immensely difficult if not impossible" for Solengo to obtain financing and lines of credit.

Solengo's two independent directors have resigned since FERC's enforcement action. That has nixed the firm's attempt to be registered in the Cayman Islands. Hunter said no new directors have agreed to serve in their place and he does not anticipate being able to find replacements.

Hunter said the Alberta Securities Commission is now unlikely to register Solengo, due to the FERC action. The firm has also been losing a number of traders who previously agreed to work for the firm.

About 25 investors had expressed interest in Solengo, and according to Hunter they had planned to invest a total of $800 million in its funds. Since the action, that figure has shrunk to $100 million, he said, and those investors who remain will likely withdraw their commitments if the FERC action continues.

Hunter went on to lament he will personally have to inject $500,000 to $1 million of his own money just to keep Solengo afloat. In addition, he said the action has derailed a local land transaction in Alberta in which he had been involved and a business transaction involving a self-storage business in the Calgary area.