Oil report

Trustee seeks SemGroup bankruptcy fraud probe

NEW YORK (Reuters) - An arm of the U.S. Justice Department wants the U.S. bankruptcy court to authorize an investigation of claims that fraudulent trading may have caused the multibillion-dollar collapse of energy trader SemGroup, according to court papers filed on Tuesday.

“The dearth of information available regarding the trading strategy and its impact upon the value of the debtor’s businesses has caused significant unrest and concern among the debtor’s customers, suppliers, lenders and investors,” Roberta DeAngelis of the office of the United States Trustee said in court papers.

The U.S. Trustee program was set up by the Justice Department in 1978 to monitor bankruptcy proceedings and ensure compliance with applicable laws.

SemGroup filed for bankruptcy on July 22, citing more than $3.2 billion in losses on energy futures and derivatives trades.

SemGroup lender RZB Finance LLC has said in court documents that SemGroup's restructuring advisers at the Blackstone Group BX.N have admitted that improper trading caused the collapse.

A spokeswoman for SemGroup said the company would cooperate with any investigation led by the U.S. Trustee.

Federal investigators are already looking into allegations that SemGroup's publicly traded subsidiary SemGroup Energy Partners LP SGLP.O did not properly disclose to investors its parent's liquidity troubles in mid-July.

News of the latest investigation comes as SemGroup is struggling to preserve its oil trading business, which prior to the bankruptcy filing handled over 500,000 barrels of oil and refined products a day.

The company’s advisers admitted in court last week that SemGroup’s crude oil gathering and trading business had shrunk to a tenth of its pre-bankruptcy size.

SemGroup laid off 250 of its 2,000 employees on Monday, including 110 at its headquarters in Tulsa, Oklahoma, in an effort to cut costs, the spokeswoman said.

Editing by Walter Bagley