A group of individual floor traders filed a lawsuit to Manhattan Federal court against the benchmark oil companies and banks including BP Plc, Royal Dutch Shell Plc, Statoil ASA, Morgan Stanley, and energy trader Vitol Group, news agency Bloomberg reported on November 6.
Kevin McDonnell, the former director of the New York Mercantile Exchange together with individual traders Anthony Insinga, Robert Michiels, and John Devivo appear as claimants. They allege that the world’s biggest oil companies have been manipulating oil prices for more than a decade. In such lawsuits, as with most filed in federal courts in the U.S., plaintiffs must allege sufficient facts that, if believed, would give them a plausible claim.
The statement of claim consists of 85 pages. It gives the details that the defendants used a variety of schemes to reap the highest profit at the expense of other market insiders. In particular, they submitted false and misleading information to Platts, an energy news and price publisher, whose quotes are used by commodity exchanges worldwide. Moreover, claimants believe that BP, Shell, and big commodity traders employed “spoofing”, the practice of placing and cancelling bids or offers in an attempt to manipulate prices or present the misleading appearance of market activity with the intention of canceling them later. Thus, “spoofing” can cause a hike in demand for securities based on the false assumption.
The compensation amount the individual brokers intend to charge has been still unknown. In May, the EU antitrust authorities raided the offices of Platts, BP, and Shell based on allegations of collusion in rigging oil prices. However, they have not laid an accusation against these companies so far. The total mercantile securities’ value is estimated at $5.7 trillion annually.
