The CFTC announced today that it has charged Parnon Energy (California), Arcadia Petroleum (UK), Arcadia Energy (Switzerland), James T. Dyer (Australia), and Nicholas J. Wildgoose (California) with manipulation and attempt to manipulate crude oil futures on the New York Mercantile Exchange (NYMEX) between January and April 2008.
According to the civil enforcement action brief, the accused traded West Texas Intermediate light sweet crude (WTI) futures and options with manipulative intent, driving the price of futures to artificial highs and lows in order to reap massive profits.
To carry out the scheme, the defendants first bought vast quantities of actual physical WTI crude, though they did not have any commercial need for it. This calculated buy-up put strain on an already tight oil market, and sent oil futures they on the NYMEX skyrocketing and the defendants made substantial profits selling their long positions. Once prices reached artificial highs, the accused began short selling WTI derivatives. Then, to complete the scheme, they sold off most of their physical crude holdings in a single day, torpedoing the WTI market value and raking in money from their short positions.
This entire cycle was completed once between January and March of 2008, and attempted again in April. The CFTC alleges that the defendants made in excess of $50 million through their price manipulation scheme, and is seeking permanent injunctive relief, disgorgement, restitution, trading and registration bans, imposition of civil monetary penalties and all other appropriate relief.