The Moore Capital settlement was a $57.75 million class action agreement, preliminarily approved in July 2014, that resolved claims Moore Capital Management manipulated platinum and palladium futures prices on the New York Mercantile Exchange. The suit alleged a Moore Capital portfolio manager pushed closing prices higher by placing large last-second buy orders between late 2007 and mid-2008, inflating what investors paid for futures contracts and physical metal.1Courthouse News Service. Moore Capital Fraud Settlement Given OK
What Moore Capital Was Accused Of Doing
Between approximately November 2007 and May 2008, Moore Capital portfolio manager Christopher Louis Pia engaged in what the Commodity Futures Trading Commission called “banging the close.” Pia entered large market-on-close buy orders for platinum and palladium futures during the final ten seconds of the NYMEX closing period, either executing the trades himself or directing Moore Capital execution clerks to place them through a futures commission merchant.2CFTC. CFTC Charges Moore Capital Management and Affiliates With Attempted Manipulation3CFTC. CFTC Order Against Christopher Louis Pia
The point, according to the CFTC, was to push settlement prices upward so Moore Capital could profit on separate, larger positions whose value tracked those same closing prices. The CFTC found Moore Capital failed to supervise Pia adequately and lacked internal policies to detect or prevent the conduct.4CFTC. CFTC Order Against Moore Capital Management
How the $57.75 Million Was Split
The class action, In Re: Platinum and Palladium Commodities Litigation (No. 1:10-cv-03617), was filed in the Southern District of New York and assigned to Judge William H. Pauley III. In July 2014, Judge Pauley granted preliminary approval to the Moore Capital settlement, which was divided into two components:1Courthouse News Service. Moore Capital Fraud Settlement Given OK5Court Listener. In Re Platinum and Palladium Commodities Litigation
- $48.4 million for plaintiffs who bought palladium futures contracts
- $9.35 million for plaintiffs who purchased physical platinum or palladium during the affected period
Judge Pauley found the agreements resulted from “informed, noncollusive negotiations” and fell within a “reasonable range for approval.” A fairness hearing was scheduled for November 2014.1Courthouse News Service. Moore Capital Fraud Settlement Given OK
The MF Global Piece
The Moore Capital payment was not the only money recovered in the case. Joseph Welsh, a broker at the now-defunct MF Global Inc., entered settlements totaling $42 million in connection with the same platinum and palladium allegations. Claims against MF Global itself had been stayed after the firm’s 2011 bankruptcy, and Welsh’s insurers reportedly denied him coverage, so the judgment against him was enforceable only against his insurance policies.6SDNY Blog. MF Global and Moore Capital Agree on Platinum and Palladium Settlement
What the CFTC Extracted Separately
The class settlement ran alongside federal enforcement actions. In April 2010, Moore Capital Management, LP, Moore Capital Advisors, LLC, and Moore Advisors, Ltd. settled with the CFTC for a $25 million civil penalty, imposed jointly and severally. The order also carried:2CFTC. CFTC Charges Moore Capital Management and Affiliates With Attempted Manipulation4CFTC. CFTC Order Against Moore Capital Management
- A two-year ban on trading platinum and palladium futures and options within the final 15 minutes of the closing period
- Three years of restrictions on the entities’ registrations as Commodity Pool Operators and Commodity Trading Advisors, with enhanced compliance procedures
- Requirements to record and review trade-related communications, submit compliance reports, and distribute the CFTC order to employees and principals
In July 2011, Pia individually settled with the CFTC, paying a $1 million civil penalty. He accepted a permanent ban on trading CFTC-regulated platinum and palladium products, a permanent ban on trading any CFTC-regulated product during market closing periods, and a five-year compliance monitor.7CFTC. CFTC Orders Christopher Louis Pia to Pay $1 Million Penalty8The New York Times DealBook. Ex-Moore Trader Pays $1 Million Fine to Settle Market Manipulation Case
Who Could Claim and What They Recovered
The plaintiff class covered investors who had purchased palladium futures contracts or physical platinum and palladium between June 2006 and April 2010. The consolidated complaint named Christopher Pia as a defendant alongside Moore Capital entities, Moore Macro Fund, LP, Moore Global Fixed Income Master Fund, LP, and MF Global, Inc. Named plaintiffs included Greg Galen, Richard White, Keith Kornell, Lawrence Waxman, and the F.W. DeVito, Inc. Retirement Plan Trust.5Court Listener. In Re Platinum and Palladium Commodities Litigation6SDNY Blog. MF Global and Moore Capital Agree on Platinum and Palladium Settlement
A.B. Data was appointed settlement administrator. The plan of allocation directed 90% of the net settlement fund based on “net artificiality paid” and 10% based on “net losses,” with disputes over claim eligibility mediated by Professor Francis McGovern. Claimants with eligible claims ultimately recovered roughly 88% of their calculated losses from the combined Moore Capital and MF Global funds.9Court Listener. In Re Platinum and Palladium Commodities Litigation – Docket
Before distribution, the court authorized deductions for attorneys’ fees of roughly $118,500 to Lovell Stewart Halebian Jacobson LLP, incentive awards of $35,000 for the futures class representatives, mediator fees, and reserve funds.9Court Listener. In Re Platinum and Palladium Commodities Litigation – Docket