The Commodity Futures Trading Commission today issued an order filing and settling charges against Glencore International A.G. of Switzerland, Glencore Ltd. of New York, and Chemoil Corporation of New York (collectively, Glencore), an energy and commodities trading firm, for manipulative and deceptive conduct. The conduct, which spanned from least 2007 to 2018, involved manipulation and foreign corruption in the U.S. and global oil markets, including manipulation or attempted manipulation of four U.S. based S&P Global Platts physical oil benchmarks and related futures and swaps. Glencore is required to pay a total of $1.186 billion, which consists of the highest civil monetary penalty ($865,630,784) and highest disgorgement amount ($320,715,066) in any CFTC case.
The CFTC’s order finds that Glencore’s manipulative and fraudulent conduct—including conduct relating to foreign corruption—defrauded its counterparties, harmed other market participants, and undermined the integrity of the U.S. and global physical and derivatives oil markets. Platts physical oil benchmarks, including those that were the subject of Glencore’s manipulative conduct, serve as price benchmarks for end-users and market participants, and are incorporated as reference prices for the settlement of numerous derivatives.
“When individuals and entities seek to disrupt the reliability of benchmarks, they interfere with the proper functioning of the markets that directly impact consumers,” said Chairman Rostin Behnam. “Without question, manipulating oil markets can drive up the cost Americans pay at the pump or to heat their homes. And today my message to the markets is clear: the CFTC will continue to pursue even the slightest hint of manipulative, corrupt, or fraudulent behavior.”
Acting Director of Enforcement Gretchen Lowe commented, “Today’s enforcement action demonstrates that the CFTC will work with its enforcement partners around the world to ensure that the U.S. markets operate free of manipulation and corruption, and the CFTC will impose substantial and robust sanctions against those market participants who engage in such conduct.”
The order finds that from as early as 2007 through at least 2018, Glencore sought to increase profits from its physical and derivatives oil products trading by manipulating or attempting to manipulate U.S. price-assessment benchmarks relating to physical fuel oil products, and related futures and swaps, in order to benefit Glencore’s trading positions. As stated in the order, Glencore personnel engaged in this conduct with the specific intent to manipulate the price of fuel oil products in interstate commerce and to create artificial prices, and could and at times did create artificial prices. Glencore engaged in this scheme on hundreds of days in order to manipulate Platts price assessments connected to four fuel oil products, and associated derivatives, in three different United States geographic markets.
The order further finds that Glencore’s conduct also involved fraud and corrupt payments (e.g., bribes and kickbacks) to employees and agents of certain state-owned entities (SOEs), including in Brazil, Cameroon, Nigeria, and Venezuela, and misappropriation of confidential information from employees and agents of certain SOEs, including in Mexico. Glencore or its affiliates made the corrupt payments in exchange for improper preferential treatment and access to trades with the SOEs. Glencore’s conduct was intended to and did secure unlawful competitive advantages in trading physical oil products and related derivatives to the detriment of its counterparties and market participants.
As reflected in the order, Glencore’s unlawful conduct involved traders and other personnel throughout its oil trading group, including senior traders, desk heads, and supervisors up to and including the global head of the oil group, and resulted in hundreds of millions of dollars in improper gains.
Parallel Criminal Actions
The Fraud Section of the Department of Justice’s Criminal Division today announced two separate criminal actions against Glencore. The CFTC order recognizes and offsets certain forfeiture and penalty payments to be made to the DOJ in those cases. The U.K. Serious Fraud Office also announced separate criminal charges against Glencore.
******
The CFTC also thanks Comissão de Valores Mobiliários (the Brazilian Securities Market Commission), the Bermuda Monetary Authority, the Hong Kong Securities and Futures Commission, the Luxembourg Commission de Surveillance du Secteur Financier, the Mexico Comisión Nacional Bancaria y de Valores, and the Banco Central del Uruguay for their assistance in this matter.
The Division of Enforcement staff members responsible for this case are Gates S. Hurand, Peter Janowski, Jacob Mermelstein, David W. MacGregor, R. Stephen Painter, Jr., Michael Cazakoff, Matthew Edelstein, Patrick Marquardt, Jordon Grimm, Lenel Hickson, Jr., and Manal M. Sultan.
Additional Division of Enforcement staff members who provided assistance are Allison Passman, Doug Snodgrass, Joseph Konizeski, Stephanie Reinhardt, and former Division staff member Brigitte Weyls.
This case is brought in coordination with the Division of Enforcement’s Corruption Task Force and is the second action brought by the CFTC involving foreign corruption.
******
CFTC’s Foreign Corrupt Practices Advisory
The CFTC’s Division of Enforcement issued an advisory on March 6, 2019 on self-reporting and cooperation for CEA violations involving foreign corrupt practices. [See CFTC Press Release No. 7884-19] As stated in the advisory, where a company or individual not registered or required to be registered with the CFTC voluntarily discloses violations of the CEA involving foreign corrupt practices, provides full cooperation and appropriately remediates, the division will apply a presumption that it will not recommend the CFTC impose a civil monetary penalty in resolution of an action, absent aggravating circumstances.
Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online. Tips can also be filed with the CFTC Whistleblower Office.
