CFTC Targets Shipping, Storage in Oil Investigation: "Prosecutions Possible." [View All]

[chill_wind]

Michael Greenberger, a former head of the CFTC's Division of Trading and Markets, said the agency is likely to find that some investment banks, hedge funds and wealthy individuals manipulated futures prices. Traders may face prosecution if they reported false prices or made offsetting trades designed to manipulate the market, he said.

``There will be a lot of administrative and criminal litigation before the sun sets on this,'' said Greenberger, who teaches law at the University of Maryland.

Greenberger said that in addition to the pressure caused by consumer furor over record motor-fuel prices, the CFTC may be trying to protect its regulatory turf from the Federal Trade Commission, which has new authority to investigate energy-market manipulation.

``I think everyone is going to be watching to see how serious the CFTC is about this,'' Greenberger said. ``Yesterday's take was that this is very serious.''

CFTC Targets Shipping, Storage in Oil Investigation (Update1)

By Tina Seeley

]May 30 (Bloomberg) -- The U.S. Commodity Futures Commission, the watchdog over the nation's commodities markets, said its investigation of oil trading will include looking at how the flow of crude may have been used to manipulate prices.

``We're particularly looking at storage and shipping and the ability that that might have in any attempted manipulation or manipulation scheme,'' Commissioner Bart Chilton said today in a telephone interview. ``That's not all we're looking at.''

The CFTC said yesterday it's investigating oil trading, the first time it publicized an ongoing probe since 2004. While the commission's acting chairman, Walter Lukken, said this month that he doesn't see manipulation driving up prices, Chilton called the investigation ``the No. 1 thing on our radar screen.'' He said it began after the commission ``saw some things last December that piqued our interest.''

(...)

Higher margin requirements could lead traders to switch to other markets, Lukken said today in an interview. Asked how shipping and storage operations may come into play in the investigation, he said there had been cases in the past of supply being withheld to move prices.

(more)

Last Updated: May 30, 2008 16:48 EDT

Full article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGzRMmD_b9MA&refer=home


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