WASHINGTON Feb 6 Two federal agencies that
police the U.S. energy market on Thursday will each try to
convince a federal judge that they have the right to decide the
fate of a trader whose bets helped bring down a billion-dollar
The case will test the authority of two watchdogs that have
similar powers to prevent fraud in billion-dollar markets where
sophisticated trades make operations difficult to police.
Brian Hunter was a key trader with hedge fund Amaranth
Advisors LLC when it failed in 2006 after booking some $6
billion in bad bets on natural gas futures.
Investors settled a class-action case against Amaranth for
about $77 million in 2011, and the Commodity Futures Trading
Commission reached a $7.5 million settlement with Amaranth two
The Federal Energy Regulatory Commission, the chief overseer
of electric power, leveled a $30 million fine against Hunter, a
Canadian, who appealed by saying FERC had no authority to punish
CFTC put its own case against Hunter on hold early last year
and even joined Hunter in his appeal against FERC, arguing the
electricity regulator had no power to levy the $30 million fine.
FERC exceeded its authority by seeking to sanction a trader
of futures contracts and other securities that are the key area
of CFTC authority, the agency has argued.
"FERC also errs by treating this case as a commonplace
example of two regulatory agencies sharing overlapping
authority," the CFTC argues in court filings.
"Congress expressly granted the CFTC exclusive jurisdiction
with respect to the trading activity that forms the basis for
the alleged manipulation here."
Officials from the regulators and Hunter did not respond to
requests for comment.
The court's ruling on the matter, which is not expected for
weeks, could have serious implications for newly aggressive
regulators trying to protect consumers and investors in volatile
FERC recently decided to strip JPMorgan Chase & Co
from its ability to make preferential trades - or tap "market
based rates" - in the energy market for six months as punishment
for past market abuses.
Specifically, in the six months from April 1, JPMorgan will
only be allowed to make physical electricity sales at cost.
Market-based rate authority allows a company to trade power at
whatever price the market will bear.