Wednesday, September 29, 2010

"Case on Amaranth collapse gets class-action status"

Return with us now to those heady pre-fin-crisis days of Summer 2007 when the only thing you had to worry about was traders acting like traders i.e. "You get the downside while I take the upside and I'll be in clover before ye...".

From Reuters:
* Traders can sue as group; over 1,000 claimants possible
* Amaranth accused of manipulating futures contracts
* Amaranth collapsed in 2006 after $6.4 billion losses

NEW YORK, Sept 28 (Reuters) - A U.S. judge ordered Amaranth Advisors LLC, a hedge fund that lost $6.4 billion through bad bets on natural gas prices, to face a class-action lawsuit over its 2006 collapse.
In a ruling dated on Monday, U.S. District Judge Shira Scheindlin granted class-action status to futures traders who bought, sold or held natural gas futures or options on futures contracts from Feb. 16 to Sept. 28, 2006.

The decision means the traders may sue as a group, which could save litigation costs and result in a larger recovery than if they sued individually.
The case "involves more than 1,000 potential claimants who are asserting claims based on common issues," Scheindlin wrote. "Claimants likely have no interest in pursuing their own claims, which may be prohibitively small."...MORE
Through July and August of '07 I was using the Amaranth fiasco as an object lesson to show that the trade part of cap-and-trade was a government mandated disaster waiting to happen.

I could have used the California electricity market manipulations of 2000 and 2001 or any number of others but I kind of got a kick out of Brian Hunter.

Here's a post with links to a bunch of our other posts, "The man who lost $6 billion (Brian Hunter, Amaranth)" and which included a couple on a fund, Saracen, which had a strategy exactly opposite of Amaranth: 
Attempting the Reverse Amaranth
which, of course, resulted in:  
Saracen Attempts the Reverse Amaranth and...Yes!... Sticks the Faceplant Landing!
At least the traders had their prior bonuses.
Good times, good times.