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Moore Capital Management has agreed to pay $48.4 million to settle a class-action lawsuit alleging that the hedge fund manipulated the platinum and palladium markets.
The deal ends more than three years of litigation and will purportedly compensate purchasers of futures tied to the metals.
Settle “Banging The Close” Suit
The settlement relates to a lawsuit that accused Louis Bacon’s Moore Capital Management of banging the close in Nymex platinum and palladium markets in 2007 and 2008.
Banging the close is a strategy in which a trader enters buy orders in the last seconds of a trading day to drive up future settlement prices.
A spokesman of the New York-based hedge fund declined to comment.
CFTC Fined Moore Capital $25 Million
In April 2010, Moore Capital paid the Commodities Futures Trading Commission a $25 million penalty to settle charges of attempted manipulation of the Nymex contracts, and also submitted to restrictions on its trading in the PGM markets.
The CFTC said Welsh routinely received market-on-close buy orders from Pia with the understanding that the latter wanted to buy at higher prices. To achieve the objective, Welsh allegedly devised and implemented a trading strategy to attempt to maximize the price impact by trading during the two-minute closing periods of the palladium and platinum futures contracts markets.
Apart from the fine, CFTC also restrained the hedge fund’s trading activities for three years, including a two-year restriction on its trades within 15 minutes of, and during, the close in the platinum and palladium futures and options markets. However, the hedge fund neither admitted nor denied the charges, according to the U.S. commodity regulator.
Last month, law firm Lovell Stewart Halebian Jacobson LLP confirmed that it was able to extract a further $48.4 million from the hedge fund, Moore Capital, to settle a class-action suit filed in New York related to the alleged price manipulation.
Lovell Stewart Halebian also shot into prominence last month when it launched a class-action lawsuit against Goldman Sachs, Metro, the London Metal Exchange and others on behalf of aluminum-consumers, accusing the defendant.