Traders Who Made $500 Million on Oil Crash Lose Antitrust Ruling

Eight London commodities traders lost their bid to end federal antitrust litigation in Chicago over claims that they participated in a $500 million scheme to rig oil futures markets when the price of a barrel briefly fell into negative territory, but their trading house and several colleagues are off the hook.

Judge Gary Feinerman let part of the case move forward in a ruling made public early Tuesday, saying the allegations make it plausible that traders at Vega Capital London Ltd. conspired to drive oil prices negative for the first time in April 2020 and subsequently concealed their market manipulation.

“There may be explanations for the correlated trading that do not involve collusion,” but those defenses are for later in the case, Feinerman wrote. As an initial matter, “the high degree of correlation” among the traders makes the “allegation of parallel conduct eminently plausible,” he said.

The lawsuit, filed in August 2020, targets Vega, its owner, and a dozen traders there who reportedly made $500 million in a single day when crude oil futures fell $56 a barrel on April 20, 2020, to close at -$37 a barrel on the New York Mercantile Exchange—the only time oil has ever gone negative.

The suit accuses Vega and its traders of dumping certain May 2020 oil futures contracts at a loss in a coordinated scheme to drive down the cost of “trading at settlement” contracts pegged to the closing price that day, of which they’d bought “a large volume” beforehand.

Prices recovered to $10 a barrel the next day, allegedly giving Vega a huge windfall. The proposed class action, led by coin collector Mish International Monetary Inc., alleges violations of antitrust laws and the Commodities Exchange Act.

Vega and the traders, meanwhile, insist they did no more than observe the market signals forecasting a “once-in-a-century storm” caused by the Covid-19 pandemic. Feinerman in May 2021 granted their unopposed request to face the case anonymously.

In the ruling docketed Tuesday, the judge cited incriminating communications among eight of the traders, who made statements like “you’ve just got to keep selling,” “I wanna see negative” prices, “we f-cking blitzed it boys,” and “please don’t tell anyone what happened today lads.”

He also noted that “a significant portion of the record price decline” that day took place when the traders “increased the quantity, rate, and manipulative quality of their selling,” including the sharpest price drops, which “occurred when their allegedly manipulative trading was at its peak.”

Among the eight traders implicated by the suspicious chat logs, trading activity that day allegedly showed a 91.9% to 99.7% correlation, Feinerman said. The parallel trades and “statements reflecting real-time trade coordination” are enough for the case to advance, he found.

But the judge tentatively dismissed claims against four of the traders who weren’t involved in those conversations, saying there wasn’t enough to tie them to the alleged conspiracy.

He also let Vega and its owner out of the case, saying the suit “does not allege parallel conduct as to Vega or its owner, Individual A,” or “any conduct” at all by them on the day in question. The structure of Vega’s contracts with its traders doesn’t support an inference of collusion, Feinerman found.

The dismissed portions of the suit can be refiled by April 28, the judge said. The ruling was originally filed under seal March 31.

Mish is represented by Lovell Stewart Halebian Jacobson LLP and Miller Law LLC. Vega is represented by Akerman LLP. The traders are represented by MoloLamken LLP and Dechert LLP.

The case is Mish Int’l Monetary Inc. v. Vega Capital London Ltd., N.D. Ill., No. 20-cv-4577, 4/12/22.