U.S. agencies fine Amaranth hedge fund $15 million

Date: Thursday, August 13, 2009
Author: Ayesha Rascoe, Reuters.com

Amaranth Advisors, the largest collapsed hedge fund in history, has been ordered to pay $15 million in civil fines for attempting to manipulate natural gas markets, federal agencies said on Wednesday.

The Commodity Futures Trading Commission said it settled charges against Amaranth and the fund has been ordered to pay a $7.5 million civil fine.

The CFTC filed a complaint in July 2007 alleging that Amaranth tried to improperly influence the price of natural gas futures contracts traded on on the New York Mercantile Exchange on Feb. 24 and April 26, 2006.

The commission also accused the fund of making false statements to NYMEX to conceal the attempted manipulation.

Separately, the Federal Energy Regulatory Commission said Wednesday it settled its manipulation case against the hedge fund. The settlement also requires the fund to pay $7.5 million to the U.S. Treasury.

FERC charged the fund with wrongdoing two years ago, seeking $291 million from Amaranth and former head trader Brian Hunter and his colleague Matthew Donohoe.

Both FERC and the CFTC said their claims against Hunter were not affected by the settlements.

A FERC hearing in Hunter's case is scheduled to start Aug. 18.

FERC regulates the buying and selling of natural gas that is shipped mostly by pipelines across state lines, while the CFTC regulates commodity exchanges, including the NYMEX, which lists contracts for the delivery of natural gas in the future at certain prices.

After losing $6.4 billion from bad bets on natural gas trading, Amaranth went out of business, resulting in the biggest hedge fund collapse ever. (Editing by Walter Bagley)