Amaranth

Hunter, Amaranth Dream Team Still Finding Ways To Lose

brianhuntermaybe.jpgWe’ve been sitting on this story because we didn’t want to rain on the comeback parade Brian Hunter’s been enjoying at the Peak Ridge Commodity Volatility & Fallen Heroes Shot at Redemption Fund, and Nick Maounis had quite nearly completed the assembly of his pussy posse, so there was that, but we can’t in good faith wait any longer: on Wednesday, a federal judge denied a motion by Amaranth Associates and its erstwhile golden boy B. Hunter, to dismiss charges brought by the Commodity Futures Trading Commission which said something about AA and BH attempting to manipulate the natural gas markets, and then lying to the NYMEX to cover up the botched mission. At the heart of the matter, the CFTC claims, are a series of instant messages between Hunter, Matthew Donohoe, other Amaranth employees and a trader at another firm, that supposedly “reveal [an] intent to manipulate prices.” You can find them here.
Personally, all I see are a bunch of “hahas,” instances of experimental grammar and, most offensively, “LOLs.” Are these transgressions emblematic of one’s trading acumen/criminality? I’m not sure. If they are, however, these guys are going down.
Hunter’s attorney, Michael Kim of Kobre & Kim LLP, told Reuters Friday, “When the case is fully examined, we are confident that Brian Hunter will be vindicated.” Kim (fictitiously) added, “Or, he will hang himself in his cell. Could go either way.”
Judge Denies Amaranth, Hunter Motion to Dismiss [Reuters]

  • 13 Dec 2007 at 11:36 AM
  • Amaranth

Amaranth Boys Fail At Moore Capital

You kind of had to root for the Amaranth guys, right? I mean, sure, we weren’t totally psyched about everything thing they did—hushed voice: Solengo—but after the wipe out a lot of very good people found themselves without desks, jobs or reasons to take the train to Greenwich. Even the wild and wooly Calgary office—Brian Hunter, please, just call us, we’ll totally get along—had a lot of good lads who had to polish their resumes when the great “meltdown” (or, if your prefer, “blowup”) sunk the firm.
So it’s with a heavy heat we note that Moore Capital Management has closed its Canadian hedge fund unit. Moore’s Canada team was based out of out Toronto and employed a number of former Amaranth traders. It’s fate was apparently sealed after its mangers lost 15 percent in November on stock and convertible-bond positions.
The Canada team was led by Manos Vourkoutiotis, who cut his teeth at Amaranth. Apparently anumber of other traders were also former Amaranth boys. They managed $1 billion for Moore funds before last month’s decline, according to two people who Bloomberg describes as “people with knowledge of the firm.” Moore has about $13 billion, so a 15 percent decline in $1 billion of its assets under management is not exactly something it could afford to shrug off.
Moore Capital Closes Canadian Unit Following Losses [Bloomberg]

  • 15 Nov 2007 at 9:49 AM
  • Amaranth

Amaranth’s Mistake, JP Morgan’s Scandal?

We’re back on the Amaranth beat this morning, and as long-time readers know, once we get our jaws around something, it takes awhile for us to let it go. After writing a bit about Amaranth’s lawsuit against JP Morgan this morning, we decided to take another look at an item published on the suit by BreakingViews, a subscription-only financial news site. It’s written as if it’s uncovering a new strategic mistake by Amaranth but we can squint our eyes a little bit and see it as a bold attack on JP Morgan.
The thrust of the BreakingView’s piece was that Amaranth had blundered by using JP Morgan as its principal broker.
“In the wake of the 1998 near-collapse of hedge fund Long-Term Capital Management, many funds that used only one prime broker found those banks pulled their credit lines, forcing the funds out of business,” Breaking Views explains. “It’s now standard practice to use several prime brokers in the hope of avoiding such a fate, and to ensure no one institution can see a fund’s entire trading strategy. Amaranth itself had a dozen prime broker relationships. But it put the bulk of its trades for its main energy strategy through only one.”
Relying too heavily on JP Morgan may well have been a mistake on Amaranth’s part. But we expect that’s not an argument that JP Morgan’s prime brokerage business would like to hear made too loudly. After all, they hardly market themselves to clients with the warning: don’t give us too much business or we’ll hold you hostage and capitalize on knowledge of your strategies. But that’s exactly the danger Breaking Views is saying Amaranth ought to have recognized.
Double whammy [BreakingViews; subscription required]

  • 15 Nov 2007 at 8:42 AM
  • Amaranth

Amaranth’s Suit Against JP Morgan: This Is Only The Start

We noted in yesterday’s Opening Bell that Amaranth had filed a lawsuit against JP Morgan, claiming the bank undermined its efforts to stave off collapse. We’re late to the details of the lawsuit because we were overtaken by events yesterday but we’ve now had a chance to review the lawsuit.
Amaranth’s main claim is that JP Morgan interfered with Amaranth’s negotiations with Goldman Sachs and Citidel, forcing Amaranth to cut a more expensive deal with JP Morgan. According to Amaranth’s lawsuit, Goldman had agreed to take over its money-losing positions in the natural gas market for a $1.85 billion payment from Amaranth. But JP Morgan, which as acting as the hedge fund’s clearing broker, refused to execute the transaction and Goldman walked. The suit also claims that Citadel initially to assume the positions $1.85 billion but the JP Morgan executives talked Citadel out of it, according the lawsuit.
With nowhere else to turn, Amaranth ended up selling its positions to JP Morgan—which took them over in exchange for a $2.5 billion payment.
JP Morgan is denying any wrong doing, of course, and calls the lawsuit “baseless.” But there have long been questions about the many roles JP Morgan played in the collapse of Amaranth. At the very least, JP Morgan’s role as Amaranth’s broker gave it insider knowledge of Amaranth’s trading strategies—which may have allowed its traders better access to information than some of the outside bidders. In the months after Amaranth’s collapse, several top energy traders were left the bank under somewhat murky circumstances. And from what we know about lawsuits, this may well be just the start of things. Amaranth could use this lawsuit to start a discovery process that would include depositions of JP Morgan executives and review of internal documents in hopes of uncovering even broader wrong-doing.
Amaranth’s Dream-Team Law Firm: Beck, Webb & Boies [LawBlog]
Amaranth’s lawsuit [Wall Street Journal]
Amaranth’s letter to investors regarding the lawsuit [Wall Street Journal]
Amaranth Sues JPMorgan for Disrupting Transactions [Bloomberg]

brianhuntermaybe.jpgFormer Amaranth energy trader and current fishing enthusiast Brian Hunter, whose natural gas picks turned out to be so wrong that they lost the hedge fund $6 billion in week, filed an 18-page plea with a federal court in Washington, D.C. on Friday, asking them to stop FERC from looking into his job history. Why? It’s causing all sorts of problems for him at his new place of employment, and not just catty inter-office talk, like “B-bone’s ass looks huge in those pants.” (That was just a for instance. “That picture with the fish was totally staged. Dude’s never caught a guppy in his life” would work, too). According to Hunter, as a direct result of FERC’s investigation into his alleged market manipulation, Solengo has lost fund directors, traders and potential investors.
“The FERC’s OSC has continued to damage Solengo Capital Advisors and the company is now on the brink of complete disintegration,” Hunter noted in a supplemental declaration, and you know he must mean it because this guy never lies. Among the supposed ways Solengo has been victimized by FERC are the fact that two directors of the Solengo Managed Funds resigned on July 25, two portfolio managers who’d previously given their word to join the firm reneged, and the fund has lost an enormous amount of (potential investor) money, though not as much as Brian misplaced at Amaranth (come on now). The filing states that prior to FERC’s (just plain rude) action, 25 investors had plans to fork over $800 million in ‘lengo. The fine wine now counts less than 12 entities with a total of $100 million among them willing to give the fund any money. And—get this—there’ve been no new inquiries since FERC started sticking its nose in other people’s business.
Hunter also jumps in his Delorean and comes back to report in the filing that he may have to walk away from the operation entirely, since Solengo will probably not win the approval of Alberta regulators while his name remains on the box. (Unsolicited: maybe that’s what you should’ve done in the first place? Taken the hundreds of millions that remained in your bank account even after you guessed everything wrong at Amaranth, sat on a beach in the Virgin Islands (or down the shore, whatever) and promised to never trade again, even through E*TRADE Financial? OR, alternatively, used these psychic powers to not blow up your former employer?).
If salty discharge hasn’t appeared around your eyes yet, wait. By Hunter’s estimation, he has invested $1.7 million of his own money and an “enormous amount of [his] time” setting up the fund that may soon just be a distant memory (remembered for getting miffed at us for showing its marketing brochures, which have since been replaced with pictures of puppies in the sun). Anyone need a minute? There’s no judgement in this room.

Read more »

  • 30 Jul 2007 at 2:26 PM
  • Amaranth

Brian Hunter Will Not Have His Integrity Impugned

brianhuntermaybe.jpgAnyone who’s ever interfaced with a jerk knows that the best of breed have an uncanny ability to turn situations around so that, all of a sudden, they’re accusing *you* of being the prick. Brian Hunter is no exception. In the middle of an interview earlier this year with Washington regulators, everyone’s favorite salmon lover went off for lunch and “never came back.” Just, you know, never came back. Made small talk about the turkey sandwiches from the deli across the street, acted as though he would be returning, like everyone else, and then never came back.
When FERC chairman Joseph Kelliher dared to go public with this information, a spokesman for Hunter said that he “voluntarily flew to the U.S.A. to meet with FERC officials and give an interview. Brian ended the interview when he and his attorney became aware that the FERC had misrepresented the agenda for the discussion.” Got that? Not only will the Hunter not be apologizing for unilaterally ending the meeting, but *he,* Brian Hunter is accusing *other people* of pulling the wool over *his* eyes.
The trader who went to lunch and never came back [globe and mail]

brianhuntermaybe.jpgThe job of a trader is a confluence of responsibilities, essentially limited to executing trades and IMing. Anyone who’s ever interfaced with one of God’s special creatures through AIM knows such an experience is a guided tour through copious spelling errors, homonym problems that suggest serious learning disabilities, response times that range from jackhammer to 3-hours-later-I’m-still-sitting-here and cockiness as far as the eye can see (*very* occasionally justified, most often not).
So while they’re not particularly revealing, it’s nice to read through some instant-message conversations between Brian Hunter, Matthew Donohoe, other Amaranth employees and a trader at another firm, who were all included in CFTC’s complaint against Hunter y Amaranth, and see that the biggest hedge fund fuckup of all time’s “experimental” grammar is no better than his actual trading. Next, we’ll publish his IMs with thefish. Those are some quality exchanges not to be missed.

Read more »

brianhuntersuedcftc.jpg“Brian Hunter simply did not undertake any manipulative trading and we are going to prove it,” said Michael S. Kim. Kim is a partner at the Kobra Kai dojo Kobre & Kim lawfirm that advises Hunter’s new hedge fund, Solengo.
Earlier today the CFTC filed a lawsuit charging that Hunter, who was trading gas for Amaranth at the time, had illegally manipulated the natural gas futures market by exploiting the New York Mercantile Exchange’s rules for determining the settlement price on futures contracts. Prices for futures contracts are set according to the volume-weighted averages of trades executed during between 2:00 p.m. and 2:30 p.m. on the last day of trading for each contract, a period known as the “closing range.”
According to the CFTC’s lawsuit, Hunter attempted to push the price of the futures contracts down by dumping large amounts of the contracts into the closing range. The complaint states that Amaranth traders would buy up large amounts of gas contracts prior to the closing range, then dump them in order to depress prices. Amaranth wanted lower prices because it held a huge short position in the contracts, the CFTC report alleges.
Hunter’s lawyers say that the contention that Amaranth desired lower prices prices is contradicted by a recent report from the Senate Permanent Subcommittee on Investigations, which they say concluded that Amaranth sought rises in natural gas futures prices.
“None of these various government bodies can come up with a consistent theory of Mr. Hunter’s alleged misconduct because in fact there was no misconduct” said Mr. Kim, “These accusations from the CFTC and the FERC against Brian Hunter are aimed at finding a scapegoat to bear the public outrage over ever-increasing energy prices. We will not stand idly by as the regulators use Brian for political cover, their action is meritless and we will prove it.”
After our review of confidential trading documents, which you may download here,* DealBreaker has concluded that Brian Hunter should tell us whether he wanted to inflate or deflate the prices in the gas futures markets while he was making these trades. Pointing out that the government is confused, inconsistent and probably abusing its power is a bit like pointing out that the Pope is Catholic. That’s what governments do.
But just because the government is out to get you, doesn’t mean you didn’t do anything wrong. So come on, Brian, give up the goods. Was Amaranth after a higher or a lower price?
*We’re totally kidding about those confidential documents. Sorry.