EXCLUSIVE U.S. Justice Department probes suspected manipulation of Platts benchmarks -sources

WASHINGTON, Oct 4 (Reuters) – The U.S. Division of Justice is investigating suspected manipulation of power pricing benchmarks revealed by S&P World Platts, increasing the company’s crackdown on misconduct within the world commodities market, based on 4 folks conversant in the matter.

London-based Platts is an information and information supplier which focuses on power, metallic and agricultural commodities. The corporate collects information from merchants on their deal costs to find out a each day market value for various bodily commodities.

U.S. prosecutors are probing suspected manipulative habits by particular person merchants when submitting these deal costs to Platts’ value assessments for oil and different power benchmarks, the 4 folks mentioned, with out specifying which of them.

The folks declined to be named because the probes usually are not public.

Over the previous 12 months, U.S. authorities have introduced two instances of alleged manipulation of Platts’ oil benchmarks by merchants at two completely different firms, however prosecutors at the moment are probing related habits throughout the market, the sources mentioned.

The beforehand unreported, industrywide probe opens up a brand new entrance within the Justice Division’s , elevating the stakes for merchants and firms globally which each day use Platts’ benchmarks to cost billions of {dollars}’ value of contracts.

The sources mentioned prosecutors are centered on merchants’ habits and gave no indication of suspected wrongdoing by Platts.

In response to a request for remark by Reuters, Platts mentioned it conducts opinions to make sure the integrity of its value assessments. Platts publishes information and correspondence used to find out a value evaluation and supplies this information to regulators when requested, mentioned Dave Ernsberger, world head of pricing and market perception for S&P World Platts.

“We have spoken with U.S. and world authorities throughout a complete vary of markets for a few years,” Ernsberger mentioned.

He declined to touch upon any potential probes.

A spokesperson for the Justice Division declined to remark.

COMMODITIES SCRUTINY

Over the previous decade, authorities globally have levied multibillion-dollar fines and pursued felony prices in opposition to banks and merchants for banding collectively to rig world benchmarks, most notoriously the London Interbank Supplied Charge.

Whereas U.S. felony authorities pursued instances in opposition to power merchants within the 2000s associated to benchmark-rigging, within the years that adopted commodities market manipulation was largely the area of civil companies together with the Commodity Futures Buying and selling Fee (CFTC) and the Federal Vitality Regulatory Fee.

Since 2019, nevertheless, the Justice Division, working with the CFTC, has ramped up scrutiny of the commodities market through a specialist unit inside its Washington-based fraud division. That unit has developed refined information analytics instruments to extra rapidly detect misconduct, Reuters final 12 months.

Whereas the unit initially centered on commodities futures spoofing, a sort of futures market manipulation, it now has the instruments and experience to dig into different areas of the market, together with business benchmarks operated by value reporting companies, mentioned one of many sources.

The company has additionally investigated a few of the world’s largest power buying and selling firms for bribery, together with Dutch buying and selling big Vitol.

That and one other current case recognized misconduct in relation to Platts’ benchmarks.

When settling bribery prices with the Justice Division in December final 12 months, Vitol additionally settled associated prices introduced by the CFTC. As a part of that settlement, Vitol paid a civil penalty to the CFTC to resolve prices of tried manipulation of two Platts bodily oil benchmarks.

Vitol mentioned on the time it was dedicated to upholding the regulation and had cooperated “extensively” all through the investigation. The corporate neither admitted nor denied the CFTC’s allegations.

In March, a former oil dealer for Glencore Plc pleaded responsible to Justice Division prices that he conspired to control the Platts benchmark for a sort of oil.

The Justice Division alleged that from September 2012 to August 2016 Emilio Jose Heredia Collado directed colleagues to position purchase or promote orders throughout a Platts buying and selling settlement window key to assessing the gasoline oil value, court docket paperwork present.

Heredia efficiently swayed benchmark costs with a purpose to profit himself and his employers, the Justice Division alleged.

He’s cooperating with an ongoing U.S. investigation, authorities have mentioned in court docket filings as not too long ago as August.

His lawyer didn’t reply to requests for remark. Glencore declined to remark.

“In each these instances, the regulators didn’t accuse Platts of wrongdoing or present any proof that makes an attempt to control our assessments have been profitable or that our assessments didn’t mirror market worth,” Platts mentioned in a press release.

Different commodities merchants are below Justice Division scrutiny. Vitality dealer Gunvor Group has mentioned it’s being probed by U.S. for corruption in Ecuador after a former worker responsible to bribery prices in April.

Reporting by Chris Prentice in Washington and Jody Godoy in New York
Additonal reporting by Clara Denina and Julia Payne in London
Modifying by Michelle Worth and Matthew Lewis

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