Firm That Made $500 Million in Oil Crash Sued for Manipulation

Vega Capital London Ltd., the small London trading house that made $500 million in one day when the price of oil futures fell to -$37 a barrel in late April, was hit with a lawsuit in Chicago federal court claiming it engineered the oil crash through aggressive, coordinated sales.

“Standard and rational practice among market participants is to seek to sell for the highest price available,” the complaint says. “However, pursuant to their manipulative scheme, defendants repeatedly engaged in a highly unusual violation of this standard practice.”

The suit also targets up to 100 unidentified Vega traders. It accuses them of “seeking to uneconomically sell” certain May 2020 oil futures at a loss April 20—the first time they ever went negative on the New York Mercantile Exchange—to drive down the cost of “trading at settlement” contracts pegged to the closing price that day.

The Vega traders had allegedly bought “a large volume” of those contracts beforehand, which gave them “a large financial incentive” for May 2020 “West Texas Intermediate” futures to “settle at the lowest possible price on April 20.”

The price fell $56 per barrel that day to close at -$37, according to the complaint. It then rose to $10 a barrel April 21, giving the Vega traders a massive windfall, the suit says.

It was filed Tuesday, the same day Vega’s $500 million haul was publicly reported, in the U.S. District Court for the Northern District of Illinois. The plaintiff, Mish International Monetary Inc., is a coin dealer that sold 10 futures contracts April 20.

Cause of Action: Commodity Exchange Act; Sherman Act.

Relief: Class certification, damages, costs, fees, and interest.

Potential Class Size: All buyers and sellers of May 2020 West Texas Intermediate futures on the New York Mercantile Exchange from April 20 through April 21.

Response: Vega didn’t immediately respond to a request for comment Tuesday.

Attorneys: Mish is represented by Miller Law LLC and Lovell Stewart Halebian Jacobson LLP.

The case is Mish Int’l Monetary Inc. v. Vega Capital London Ltd., N.D. Ill., No. 20-cv-4577, complaint filed 8/4/20.