From the June 01, 2010 issue of Futures Magazine • Subscribe!

CFTC charges Moore Capital and Goldman Sachs

Hedge fund giant Moore Capital Management, LP and affiliates Moore Capital Advisors, LLC and Moore Advisors, Ltd., were ordered to pay a $25 million penalty in a settlement of attempted manipulation charges brought by the Commodity Futures Trading Commission (CFTC) related to trades in Nymex platinum and palladium contracts in 2007 and 2008.

In addition to the monetary penalty, the CFTC order restricts Moore and its affiliates’ registrations and places a two-year restriction on trading within 15 minutes of the close of the platinum and palladium futures and options markets.

The order charged that a former Moore portfolio manager attempted to manipulate the settlement prices of platinum and palladium futures contracts traded on Nymex by engaging in a practice known as “banging the close.”

The order recognizes Moore Capital’s cooperation with the CFTC during the investigation. Moore stated, “Neither Moore Capital’s principals nor its current management were involved in any improper trading, and none have been accused of any wrongdoing. We are committed to high standards of integrity in our business practices and have worked diligently to reach a settlement with the CFTC.”

Bread and circuses

The fraud charges leveled against Goldman Sachs by the Securities and Exchange Commission (SEC) in April devolved into a melodrama with Goldman representing the greed and excess of Wall Street during Congressional hearings.

More on point, the SEC alleges that Goldman failed to disclose to investors vital information about the Abacus 2007-AC1 Collateralized Debt Obligation (CDO) it structured and marketed. Specifically the role that hedge fund Paulson & Company played in the portfolio selection process and that Paulson was shorting the CDO.

Goldman stated that the charges are unfounded in law and fact and noted in its defense that it had long exposure to the CDO, extensive disclosure was provided and that it never represented to its largest investor that Paulson was going to be a long investor.

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