Amaranth Advisors Hedge Fund Won’t Face SEC Enforcement Action

Date: Thursday, August 27, 2009
Author: Katherine Burton, Bloomberg

Amaranth Advisors LLC, the hedge- fund that lost $6.6 billion in September 2006, won’t face enforcement action by the U.S. Securities and Exchange Commission.

The SEC completed a three-year investigation to determine if Amaranth, which at its peak ran about $9.5 billion, had misled investors in any way, including trading outside its mandate or failing to disclose pertinent information to them. The Washington-based agency notified the firm of its decision in an Aug. 19 letter.

“Needless to say, we are very pleased with this decision,” Nick Maounis, Amaranth founder, said in a letter to investors today.

Amaranth agreed to pay $7.5 million without admitting any wrongdoing earlier this month to settle allegations from the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission that it tried to manipulate natural-gas futures. The FERC initially proposed a $291 million fine.

Maounis told investors that it was cheaper to settle with regulators than to pay legal fees to fight the case.

Amaranth’s investors lost 60 percent of their assets in 2006 after bets on natural gas made by trader Brian Hunter lost about $6.6 billion. Maounis decided to close his hedge fund and return the remaining money to investors.

He opened the Greenwich, Connecticut-based Verition Multi- Strategy Fund in October 2008.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net