CFTC drags Amaranth & Hunter to court

Amaranth Advisors LLC, the hedge- fund company that lost $6 billion as a result of bad betting on natural-gas prices last year, and its former head of energy trading will now face allegations by U.S. regulators, who alleged the hedge fund tried to manipulate U.S. natural gas prices.

The Commodity Futures Trading Commission (CFTC) on Wednesday filed a civil enforcement action in federal court in New York, contending the Greenwich, Connecticut based Amaranth and trader Brian Hunter, a one-time star energy trader at shuttered hedge fund Amaranth Advisors LLC, tried to sway prices with large sell orders late in the trading session on Feb. 24 and April 26, days when monthly futures contracts expired.

Hunter, who was touted as a rising star when he served as the Canadian head of the hedge fund's energy trading desk, was answerable for a series of big-money bets that natural gas prices would surge in 2006.

The 33-year-old trader, who was at the centre of last year’s hedge fund blow-up, established his own fund, Solengo Capital Advisors, in Calgary after he quit Amaranth.

In its legal action, CFTC seeks fines of $130,000 for each violation and is urging the court to bar Amaranth and Hunter from trading for life.

Amaranth as well as a person from Hunter’s Calgary office yesterday declined to comment on the CFTC allegations.

However, Michael Kim, an attorney for Hunter with the New York firm of Kobre & Kim LLP, in a statement said that his client is innocent. “Brian Hunter simply did not undertake any manipulative trading and we are going to prove it,” he said.

In a separate announcement, Hunter said that he would “combat aggressively” the charges levied by CFTC against him.

In April, Hunter started legal action against Dealbreaker.com, a website that published Solengo's prospectus. In his copyright lawsuit, filed in federal court in Manhattan, Hunter alleges the prospectus was posted in its entirety on Dealbreaker.com, contending further that the Web site's publisher and editors refused to remove the document.

This week on July 23rd, Hunter filed a lawsuit against another regulator – the Federal Energy Regulatory Commission (FERC) in U.S. District Court in Washington, D.C., seeking an injunction against FERC.

He urged the court to block the agency from taking action against him, arguing that FERC has jurisdiction only in regulating the physical wholesale energy markets, not the futures markets, which is the jurisdiction of the CFTC.