Exclusive: US Department of Justice investigates alleged manipulation of Platts references -sources
WASHINGTON, Oct.4 (Reuters) – The US Department of Justice is investigating suspected manipulation of energy price benchmarks published by S&P Global Platts, expanding the agency’s crackdown on malpractice in the global raw materials, according to four people familiar with the matter.
Platts, based in London, is a data and news provider focused on energy, metals and agricultural commodities. The company collects data from traders on their selling prices to determine a daily market price for a number of physical commodities.
U.S. prosecutors are investigating suspicious manipulative behavior by individual traders when submitting those prices to Platts’ price assessments for oil and other energy benchmarks, the four said, without specifying which ones.
The people declined to be named because the inquiries are not public.
By pushing the benchmark prices up or down, traders can increase their profits.
Over the past year, U.S. officials have reported two cases of alleged manipulation of Platts’ oil benchmarks by traders from two different companies, but prosecutors are now investigating similar behavior in the market, the officials said. sources.
The previously unreported industry-wide investigation opens a new front in the Justice Department’s crackdown on fraud, bribery and manipulation in the commodities market, increasing the issues for traders and businesses around the world who use Platts credentials daily to value billions of dollars. of contracts.
The sources said prosecutors are focusing on the behavior of traders and gave no indication of suspected wrongdoing by Platts.
Platts publishes its assessment methodology which includes checks to ensure data integrity, such as the appointment of an independent external auditor “to review and report on its adherence to this declared methodology,” according to its website.
In response to a request for comment from Reuters, Platts said it performs reviews to ensure the integrity of its price assessments. Platts publishes the data and correspondence used to determine a price assessment and provides that data to regulators on request, said Dave Ernsberger, global head of pricing and market intelligence for S&P Global Platts.
“We have spoken with US and global authorities in a variety of markets for many years,” Ernsberger said.
He declined to comment on any potential investigation.
A spokesperson for the Department of Justice declined to comment.
CONTROL OF GOODS
Over the past decade, authorities around the world have imposed multibillion-dollar fines and criminal charges against banks and traders for banding together to rig global benchmarks, including the Interbank Offered Rate. in London.
While US law enforcement prosecuted energy traders in the 2000s over benchmark rigging, in the years that followed manipulation of the commodities market was largely the domain of agencies. civil, including the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission.
Since 2019, however, the Department of Justice, in conjunction with the CFTC, has stepped up oversight of the commodities market through a specialized unit within its Washington-based fraud division. This unit has developed sophisticated data analysis tools to detect faults more quickly, Reuters reported Last year.
The unit initially focused on commodity futures spoofing, whereby futures traders place buy or sell orders that they intend to cancel in order to falsely create the impression of strong demand or supply. They then capitalize on the market reaction.
But the unit now has the tools and expertise to dig into other areas of the market, including industry benchmarks tapped by pricing agencies, one of the sources said.
The agency has also investigated some of the world’s largest energy trading companies for corruption, including Dutch trading giant Vitol.
This case and another recent case identified misconduct in relation to Platts’ credentials.
When settling the corruption charges with the Justice Department in December last year, Vitol also settled the related charges brought by the CFTC. As part of the settlement, Vitol paid a civil fine to the CFTC to resolve charges of attempted manipulation of two physical Platts oil credentials.
Vitol said at the time that he was committed to upholding the law and had cooperated “extensively” throughout the investigation. The company has neither admitted nor denied the CFTC’s allegations.
In March, a former Glencore Plc (GLEN.L) oil trader pleaded guilty to Justice Department charges of conspiring to manipulate the Platts benchmark for one type of oil.
The Justice Department alleged that from September 2012 to August 2016, Emilio Jose Heredia Collado asked his colleagues to place buy or sell orders during a Platts trade settlement window, key to evaluating the price of fuel oil, according to court documents.
Heredia has succeeded in influencing benchmark prices to benefit himself and his employers, the Justice Department said.
He is cooperating with an ongoing US investigation, authorities said in court files as late as August.
His lawyer did not respond to requests for comment. Glencore declined to comment.
“In both of these cases, regulators have neither charged Platts with wrongdoing nor provided evidence that attempts to manipulate our valuations were successful or that our valuations do not reflect market value,” Platts said in a statement.
Other commodity traders are under the control of the Ministry of Justice. Energy trader Gunvor Group said it was under investigation by U.S. authorities for bribery in Ecuador after a former employee pleaded guilty to bribery charges in April.
Reporting by Chris Prentice in Washington and Jody Godoy in New York Additional reporting by Clara Denina and Julia Payne in London Editing by Michelle Price and Matthew Lewis
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