Vega Capital London Manipulation of WTI Oil Futures Contracts Class Action

On April 20, 2020, on the New York Mercantile Exchange (NYMEX), the price of the West Texas Intermediate (WTI) light sweet crude oil futures contracts to expire in May were trading at negative $37.63 a barrel—meaning that sellers had to pay buyers to take the oil off their hands. The complaint for this class action alleges that Vega Capital London, Ltd. and others manipulated the prices of futures contracts in this market, in violation of the Commodity Exchange Act (CEA) and the Sherman Antitrust Act.

The class for this action is all persons and entities who bought or sold light sweet crude oil (WTI) futures contracts traded on NYMEX in the period between at least April 20, 2020 and April 21, 2020.

It wasn’t just the low price that startled participants on April 20. The complaint says, “The largest trading range on any day of the last three days of trading in a WTI light sweet crude oil futures contracts (‘NYMEX WTI crude oil futures’) from 2000-2019 was approximately $26.65 per barrel. The trading range on April 20, 2020 of approximately $58.17 a barrel corresponds to almost a 40 standard deviation event.”

Why did this happen? The complaint alleges that “at least a dozen traders associated with Vega Capital worked together to aggressively sell May 2020 WTI futures contracts and other related instruments” to depress the price.

Just before that, traders associated with Vega had bought a large number of Trading At Settlement (TAS) contracts. These allowed Vega the right to buy May 2020 contracts at a price that would be determined by the settlement price of that contract at the end of trading on April 20. The lower the price of the contract on April 20, the less Vega had to pay.

Normally, market participants try to sell at the highest possible prices. However, in this scheme, the complaint says, Vega “repeatedly engaged in a highly unusual violation of this standard practice by seeking to uneconomically sell May 2020 WTI crude oil futures contracts at the lowest possible price so as to register the lowest possible prices and settlement price for the May 2020 contract.”

The profit for Vega, the complaint alleges, may have been as much as $500 million. Since the trading of commodity futures is a zero-sum game, the complaint claims, this caused others to lose as much as $500 million.

In addition to the largest range in price, the price on April 20 was unusual for a number of reasons, the complaint says:

  • It was around $55.90 lower than the previous day’s price.
  • It was the first time it traded at negative prices.
  • It fell by more than $25 a barrel during the last two minutes of trading.

The next day, the same contract closed at $10.01 a barrel, more than a $47 per barrel increase.

The plaintiff in this action, Mish International Monetary, Inc., claims to have lost over $92,000 in the April 20 trading due to the market manipulation.

Article Type: Lawsuit
Topic: Antitrust

Most Recent Case Event

Vega Capital London Manipulation of WTI Oil Futures Contracts Complaint

August 4, 2020

On April 20, 2020, on the New York Mercantile Exchange (NYMEX), the price of the West Texas Intermediate (WTI) light sweet crude oil futures contracts to expire in May were trading at negative $37.63 a barrel—meaning that sellers had to pay buyers to take the oil off their hands. The complaint for this class action alleges that Vega Capital London, Ltd. and others manipulated the prices of futures contracts in this market, in violation of the Commodity Exchange Act (CEA) and the Sherman Antitrust Act.

Vega Capital London Manipulation of WTI Oil Futures Contracts Complaint

Case Event History

Vega Capital London Manipulation of WTI Oil Futures Contracts Complaint

August 4, 2020

On April 20, 2020, on the New York Mercantile Exchange (NYMEX), the price of the West Texas Intermediate (WTI) light sweet crude oil futures contracts to expire in May were trading at negative $37.63 a barrel—meaning that sellers had to pay buyers to take the oil off their hands. The complaint for this class action alleges that Vega Capital London, Ltd. and others manipulated the prices of futures contracts in this market, in violation of the Commodity Exchange Act (CEA) and the Sherman Antitrust Act.

Vega Capital London Manipulation of WTI Oil Futures Contracts Complaint
Tags: Antitrust, Securities