WASHINGTON, April 14 Arcadia Petroleum and Parnon Energy have entered talks to settle accusations by the Commodity Futures Trading Commission that they fixed the physical crude oil market, possibly ending one of its most highly-publicized oil manipulation cases.
The derivatives regulator in May 2011 sued two well-known traders, James Dyer of Parnon Energy and Nick Wildgoose of Arcadia, and their firms for allegedly making $50 million by squeezing markets in 2008.
But in a March 17 letter signed by a CFTC representative and the law firm representing the defendants, both parties asked a judge to push back a scheduling order, because they had entered mediation talks to avoid a trial.
"The parties have agreed in principle to enter into mediation," the letter to U.S. District Judge William Pauley said. If the parties reach an agreement, the case won't go to trial, a source familiar with the matter said.
The mediation efforts are part of the public record, but have not been previously reported. The CFTC declined comment.
The CFTC case alleges that traders, both of whom previously worked at BP Plc, amassed large physical positions at an important U.S. oil trading hub to create the impression of tight supplies that would boost prices.
Later they dumped those barrels back onto the market, causing prices to crash and racking up profits from positions they had accrued in futures markets, the suit said.
Parties in a related case were also seeking settlement, court documents showed. This case was originally filed by derivatives trader Stephen Ardizzone, who is seeking class-action status on behalf other investors.
"A proposal was made for mediation and we've agreed to it in connection to both cases," the source said.
Plaintiffs in the second case - who now also include AIS Futures Management LLC and Adams Affiliaties - claimed the defendants had manipulated futures over a longer time period than the CFTC had asserted.
Arcadia Petroleum and Parnon Energy, which are owned by Norwegian billionaire John Fredriksen, have denied the charges, and have unsuccesfully sought to dismiss the cases.
The cases are CFTC vs. Parnon Energy, Inc. et al, Case No 11-cv-3543 and Stephen Ardizzone et al vs. Arcadia Petroleum, Parnon Energy et al, Case No 11-cv-03600, both in the U.S. district court, Southern District of New York. (Reporting by Douwe Miedema Additional reporting by Josephine Mason in New York; Editing by James Dalgleish)