Amaranth Suit v. JPMorgan Can Go Ahead

Date: Wednesday, November 12, 2008
Author: HFN Daily Report

A New York State court judge said that Amaranth Advisors can go to trial on its breach of contract claim against JPMorgan Chase for losses the hedge fund firm said it suffered when its natural gas bets blew up in 2006.

Amaranth charged that its brokerage firm, JPMorgan, blew up two deals, one with Goldman Sachs and the other with Citadel Investment Group, to rescue the failing natural gas portfolio. Amaranth's star commodity trader Brian Hunter lost $6 billion for the firm in only a few weeks in September 2006 when his bets on natural gas prices turned out to be wrong.

The bank's reason for allegedly sabotaging the deals was to take advantage of Amaranth's vulnerable position, the hedge fund claimed. Amaranth also alleged that JPMorgan then turned around and made a trade with Citadel, for which it pocketed $725 million.

Judge Richard Lowe said that whether JPMorgan should have executed the Goldman trade in accordance with Amaranth's order was an issue that had be decided in a trial. However, the judge dismissed five other claims Amaranth made against the bank.

Amaranth said in a statement, "We are pleased that the case is proceeding and that Justice Lowe has allowed the claim where we seek the highest amount of damages to move forward. We are currently reviewing our options with respect to the dismissed claims."

JPMorgan did not immediately return a request for comment.