Category Archives: Energy Trading

Energy broker pleads guilty to insider trading scheme

Mathew Webb, of Tiki Island (near Galveston) has pleaded guilty for his role in an insider trading and kickback scheme. Back in February, I wrote about energy trader John Ed James who pleaded guilty for his role in the same scheme.

Webb paid kickbacks to James and co-conspirator Marcus Schultz (who pleaded guilty in July 2020) using commission fees paid by Schultz’s employer, Shell.



Instead of trading futures contracts openly and competitively, Schultz disclosed to James and Webb material non-public information that he would be willing to accept on behalf of Shell. Webb would arrange offsetting trades with James and another unnamed co-conspirator. The group would net the difference between the price of these trades and the price that would have been obtained in arms-length transactions. Illicit gains totaling $966,403 were split among the group. Webb received $585,000.

The scheme ran from 2013 to 2016.

In June 2019, the National Futures Association suspended Webb through January 2022 and fined his company $200,000. They found that Webb “failed to uphold high standards of commercial honor and just and equitable principles of trade.”

The hearing panel also found that the company failed to maintain adequate and complete records. The panel had heard evidence that three years’ worth of telephone recordings were missing due to a malfunction. Mary Webb, the wife of Mathew, was the Associated Person for the business (someone who is meant to ensure the business follows the rules of the regulatory bodies).

Webb is scheduled to be sentenced in September. Schultz and James also awaiting sentencing.

https://www.justice.gov/opa/pr/former-energy-broker-pleads-guilty-insider-trading-and-kickback-scheme

 

Energy trader pleads guilty for role in $1m insider trading scheme

John Ed James, 51, of Katy, has pleaded guilty to conspiracy to commit commodities fraud and wire fraud for his role in an insider trading scheme.



James was a natural gas trader and owner of his own trading firm. He worked with Marcus Schultz, who was a natural gas trader at a large company in Houston. Two other unnamed individuals, a broker and an energy trader, were also involved in the scheme.

Instead of trading futures contracts openly and competitively, Schultz disclosed to James and the unnamed broker material non-public information that he would be willing to accept on behalf of the company. The broker would arrange offsetting trades with James and the other individual. The group would net the difference between the price of these trades and the price that would have been obtained in arms-length transactions. Illicit gains totaling $966,403 were split among the group.

The scheme began in 2013 and ran until June 2016.

Schultz pleaded guilty in July 2020 and is scheduled to be sentenced in June 2021. In September, the Commodity Futures Trading Commission ordered Schultz to pay a penalty of $669,750 and disgorge $427,067 in ill-gotten gains. If the Federal court imposes fines or penalties on Schultz, the CFTC amounts would be offset.

Sentencing for James is set for April 2021.

The case is the first time that the Department of Justice has prosecuted insider trading in the commodity markets since the relevant law was passed as part of the Dodd-Frank Act in 2011.

https://www.justice.gov/usao-sdtx/pr/former-natural-gas-trader-pleads-guilty-role-commodities-insider-trading-scheme

Houston oil trader indicted over Ecuador bribery scheme

Javier Aguilar, a Mexican citizen living in Houston, has been indicted on charges of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and conspiracy to commit money laundering. He faces charges in the Eastern District of New York.

Mr Aguilar was an Oil Trader for Vitol, which has its head office in Geneva. According to the press release released by the Justice Dept, between mid-2015 and 2020, Aguilar paid two intermediaries $1.4 million for their efforts to bribe government officials in Ecuador. In turn, the intermediaries paid out $870,000 to the officials.



In exchange for bribes, Vitol secured contracts to purchase approximately $300 million in fuel oil.

Press Release and Indictment details don’t match

What’s interesting is that the details quoted in the press release don’t match the details in the indictment.  The indictment has two counts. Count One is the conspiracy to violate the FCPA. This count has all the detail. Count Two is the conspiracy to commit money laundering and the indictment has no specific details on this.

The Scheme

Regarding count One, the indictment states that Aguilar sent an email in September 2016 to one of the intermediaries directing that individual to send a letter from a state-owned entity in Oman to Ecuadorian official #1.

One of the intermediaries created 39 sham invoices and sent them to a shell company in Curaçao. Vitol wired approximately $750,000 from a UK bank account to the shell company. It’s not clear in the indictment which invoices this payment covered. However, as payment for 13 of the 39 invoices, the shell company wired approximately $250,000. The money was sent to bank accounts in the Cayman Islands and Curaçao controlled by the intermediaries. In turn, they sent $225,000 (via a correspondence bank in New York) to an account in Portugal controlled by the Ecuadorian official.

The press release refers to Ecuadorian officials, however, the indictment only refers to one in count One.

If convicted, Aguilar faces a maximum sentence of 20 years in prison

https://www.justice.gov/opa/pr/oil-trader-indicted-international-bribery-and-money-laundering-conspiracy-involving-corrupt