Amaranth Advisors Seeks at Least $350 Million From Touradji

Date: Tuesday, September 22, 2009
Author: Chanyaporn Chanjaroen, Bloomberg.com

Amaranth Advisors LLC, the hedge fund that lost $6.6 billion three years ago this month, sued Paul Touradji and his employees, seeking at least $350 million for claims including breach of contract and misappropriation of trade secrets.

Amaranth says Touradji breached two contracts agreed to in September 2006 regarding the transfer and purchase of Amaranth’s base-metals portfolio, according to a complaint filed Sept. 18 in New York State Supreme Court in Manhattan.

Touradji and employees at Touradji Capital Management LP used the information “to recover profits obtained by defendants through improper trading practices and misuse of plaintiffs’ proprietary and confidential information,” according to the document.

Investors in Amaranth, founded by Nick Maounis in 2000, lost 60 percent of their money in 2006 over wrong-way bets on natural gas made by trader Brian Hunter. Amaranth is also suing JPMorgan Chase & Co., claiming the bank sabotaged two potential transactions in September 2006, one with Goldman Sachs Group Inc. and the other with Citadel Investment Group LLC, as the fund was collapsing.

Maounis closed his firm following the losses and returned the remaining money to investors. Maounis, through a spokesman, declined to comment on the Touradji suit.

Touradji Capital Management invests about $2.7 billion in commodities and raw-materials companies. The firm’s Global Resources Master Fund, its largest, has delivered positive returns to investors every year since its 2005 inception.

Commodities, Raw Materials

Paul Crone, Touradji’s head trader, and Thomas Dwan, chief financial and compliance officer, were also listed among the defendants. Armel Leslie, a spokesman for Touradji, declined to comment.

Crone was head of trading for industrial metals at Investec Bank U.K. and also worked for AIG International Trading. Dwan joined Touradji Capital from its start in January 2005.

Touradji is currently also facing lawsuits from two former employees over $25 million each in back pay. A former business partner is suing Touradji claiming that the hedge-fund manager pushed him out of a venture to drill for oil in Texas and Louisiana. Touradji says these suits are without merit.

Amaranth controlled more than half the U.S. natural gas market before its collapse, according to a Senate report released in June 2007. It agreed last month to pay $7.5 million to settle allegations from U.S. regulators that it tried to manipulate natural-gas futures.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall.

The case is Amaranth LLC v. Touradji Capital Management LP, 09-602885, New York State Supreme Court in Manhattan.

To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net