Bloomberg — Trafigura Group has agreed to pay $55 million to settle allegations by the U.S. Commodity Futures Trading Commission (CFTC) that it manipulated a benchmark index of fuel oil and prevented its employees from cooperating with regulators.
The case is the latest in a series of recent allegations of wrongdoing affecting Trafigura, one of the world’s largest commodities traders, after it declared in March guilty of bribing Brazilian oil officials and in December was indicted by Swiss prosecutors for alleged corruption in Angola. They also mark the latest move by the CFTC, which has historically focused on futures markets, to pursue irregularities by physical commodity traders.
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The CFTC filed three separate allegations of wrongdoing against Trafigura on Monday.
He said that the commercial house improperly obtained non-public information related to the gasoline market from a Mexican trading firm between 2014 and 2019. He said that the company manipulated the Platts benchmark index of the fuel oil American to benefit its positions in derivatives. And he said that Trafigura interfered with communications with complainants by requiring employees to sign agreements containing non-disclosure clauses.
Trafigura neither admitted nor denied the regulator’s allegations in agreeing to settle the case. “Since the period in question, Trafigura has voluntarily undertaken significant steps to improve its compliance programme,” the company said in a statement.
The CFTC order did not name the “Mexican business entity” from which Trafigura obtained non-public information, but it did describe the lengths to which the individuals involved went to avoid discovery.
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“Certain Trafigura traders understood the sensitivity of improperly obtained confidential information and took steps to keep it secret,” according to the CFTC. “Sometimes, The documents were delivered by hand from Mexico to the United States in paper formatwithout leaving electronic evidence that Trafigura had the information.”
The order did not identify any individual operators or accuse them of wrongdoing. A Trafigura spokesperson declined to say whether the individuals in question were still working at the company.
Trafigura is the latest major trading company to be accused of manipulating US fuel oil prices. The CFTC previously accused its rivals Vitol Group and Glencore Plc to manipulate the same market. As in those cases, Trafigura was accused of manipulating physical references published by S&P Global Platts.
In February 2017, Trafigura bid heavily on high-sulfur fuel oil from the US Gulf Coast during the Platts “window”, a key liquidity point on which the benchmark is based. It bought 80 cargoes, or 3.6 million barrels, in the window, more than it had ever bought before in a single month.
The CFTC said this buying strategy benefited Trafigura’s derivatives positions, which would benefit from a rise in the benchmark index.
“Trafigura’s almost exclusive use of the Platts window to supply large quantities of fuel oil in one month was a departure from its previous conduct, and large volume created artificially high values of the USGC HSFO Benchmark throughout February 2017 that did not reflect ordinary forces of supply and demand,” the CFTC said.
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Finally, the CFTC said Trafigura had illegally prevented people from communicating with its staff by requiring its employees to sign agreements with non-disclosure clauses that did not include any exceptions for communicating with law enforcement or regulators. The CFTC said it was the first time a company had been accused of interfering with whistleblower communications.
CFTC commissioners Summer Mersinger and Caroline Pham, both Republicans, issued statements criticizing the allegation related to the employee agreements. Mersinger argued that the agency was “falling victim to regulating by enforcement” and should have been more explicit about its requirements around nondisclosure agreements.
Trafigura said that would modify the non-disclosure clauses in its contracts to make clear that they did not limit communications with government authorities about possible violations of the law.
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