Moore Capital Fraud Settlement Given OK
(CN) - Moore Capital can pay $57.75 million to settle commodities-fraud claims that it manipulated the prices of platinum and palladium, a federal judge ruled.
The Commodity Futures Trading Commission had fined Moore Capital Management $25 million in 2010 for manipulating the prices of platinum and palladium futures contracts.
Specifically, Moore engaged in a practice known as "banging the close," whereby a trader manipulates the day's closing price for a commodity by buying or selling a large number of futures contracts in order to benefit on a larger position in a separate transaction based on the futures settlement price of the day.
Several individuals filed a commodities fraud class action one day later, and their claims were consolidated with similar claims that sought damages for the firm's market manipulation.
U.S. District Judge William Pauley III on Tuesday granted preliminary approval to settlement agreements under which Moore will pay $48.4 million for its alleged manipulation of the futures market, and $9.35 million for the effects of its conduct on class members who purchased platinum or palladium bullion.
Joseph Welsh, a former commodities trader at now-bankrupt defendant MF Global, also agreed to an entry of judgment against him for negligence for $35 million, with the stipulation that the judgment can only be enforced against insurance policies.
Pauley's order rejected an objection by MF Global's trustee, who sought a "clarification" that Welsh's admission is not binding on his former employer.
"The trustee has not shown formal legal prejudice here and does not have standing to object," Pauley wrote. "Courts do not typically prognosticate about the rest judicata effect of current orders in some future circumstance."
Class member Susan Levy meanwhile failed to support her objection that the settlement favored "short" investors, over investors who bet "long."
"The plan of allocation treats longs and shorts equally. This objection is a misunderstanding of the allocation," Pauley said.
The court will hold a fairness hearing in November, and class members will be permitted to submit their objections to the settlement via email.