Commodity Trading Firm Settles Bribery and Manipulation Charges for Over $1 Billion
The CFTC and DOJ settled actions (see announcements here and here) against an energy and commodities trading firm and two of its subsidiaries for manipulative and fraudulent practices, foreign corruption and bribery in the U.S. and global oil markets.
The CFTC determined that the firm manipulated oil markets and defaulted other market participants through corruption and misappropriation of material nonpublic information. The CFTC found that the firm engaged in practices intended to manipulate the price of various oil products published by S&P Global Platts, which are used as a reference in various cleared and uncleared derivatives. In addition, the CFTC found that the firm made fraudulent payments to state-owned entities in Latin America and Africa and misappropriated confidential information from such entities.
As a result, the CFTC found that the firm and its subsidiaries violated Section 6(c)(1), Section 6(c)(1)(A), Section 6(c)(3) (generally, "Prohibition regarding manipulation and false information") and Section 9(a)(2) ("Violations generally; punishment; costs of prosecution") of the Commodity Exchange Act. The CFTC also charged the firm with violating CFTC Regulation 180.1 ("Prohibition on the employment, or attempted employment, of manipulative and deceptive devices") and Regulation 180.2 ("Prohibition on price manipulation"). To settle the civil charges, the firm agreed to pay $320 million in disgorgement and $865 million in civil penalties, as well as a series of compliance and other undertakings.
In the criminal proceeding, the firm and its subsidiaries pleaded guilty to charges of violating the Foreign Corrupt Practices Act ("FCPA") as well as participating in a commodity price manipulation scheme. The DOJ found that, between 2007 and 2018, the firm and its subsidiaries paid approximately $79.6 million in bribes to receive unlawful advantages in business activities with state-owned enterprises in multiple countries. To settle the criminal corruption charge, the firm agreed to (i) plead guilty to one count of conspiracy to violate the FCPA and (ii) pay $428 million in criminal fines and $272 million in disgorgement and forfeiture.
The UK Serious Fraud Office, the Brazilian Ministério Público Federal and the Swiss authorities have also reached parallel resolutions on this matter. $256 million of the total penalties for their charges will be credited to the U.S. CFTC and the UK Serious Fraud Office. The Swiss authorities may also be credited a portion of the penalties provided a resolution is reached within one year.
To settle the manipulation charges, the firm agreed to (i) pay a criminal fine of $341 million and (ii) a forfeiture of $144 million, of which $242 million was credited to the CFTC.
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