Aggregated News From Investment Management Regulators

CFTC Orders Vitol Inc. to Pay $95.7 Million for Corruption-Based Fraud and Attempted Manipulation

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— The Commodity Futures Trading Commission today issued an order filing and settling charges against Vitol Inc., an energy and commodities trading firm in Houston, Texas, for manipulative and deceptive conduct. The conduct, which spanned from 2005 to early 2020, involved foreign corruption and physical and derivatives trading in the U.S. and global oil markets, including attempted manipulation of two S&P Global Platts physical oil benchmarks. The order requires Vitol to pay more than $95 million in civil monetary penalties and disgorgement.

The CFTC’s order finds that Vitol’s fraudulent and manipulative conduct—including conduct relating to foreign corruption—defrauded its counterparties, harmed other market participants, and undermined the integrity of the U.S. and global physical and derivatives oil markets. This case is brought in coordination with the Division of Enforcement’s Corruption Task Force and is the first action brought by the CFTC involving foreign corruption.

“This historic enforcement action demonstrates that the CFTC will actively pursue fraud tied to foreign corruption and manipulation that impacts the U.S. derivatives and related physical markets,” said Chairman Heath P. Tarbert. “I want to thank Neel Chopra in particular for his leadership in helping the Commission bring this important action.”  

Related Criminal Action

In a parallel matter, the Department of Justice’s Fraud Section and the United States Attorney’s Office for the Eastern District of New York today announced entry of a Deferred Prosecution Agreement (DPA) with Vitol, deferring criminal prosecution on charges of conspiracy to violate the Foreign Corrupt Practices Act. Under the terms of the DPA, Vitol agreed, among other things, to pay a criminal fine. The CFTC order will recognize and offset a portion of any criminal penalty made to the DOJ.

Case Background

The order finds that Vitol committed fraud by making corrupt payments (e.g., bribes and kickbacks) to employees and agents of certain state-owned entities (SOEs) in Brazil, Ecuador, and Mexico to obtain preferential treatment and access to trades with the SOEs to the detriment of the SOEs and other market participants. Vitol concealed its fraud by funneling the corrupt payments through offshore bank accounts or to shell entities, and at times, issuing deceptive invoices for purported “market intelligence” or “sell support.” Vitol engaged in this conduct to secure unlawful competitive advantages in trading physical oil products and derivatives.

The order further finds that Vitol committed fraud by making corrupt payments to employees and agents of the Brazilian SOE in exchange for confidential information, including confidential material involving Vitol’s trading in physical oil and derivatives. This material included at times the specific price information—referred to internally at Vitol as the “gold number”—at which Vitol understood it would win a supposedly competitive bidding or tender process. The order also finds that in August 2014 and July 2015, Vitol acted to manipulate two Platts fuel oil benchmarks for the purpose of benefiting Vitol’s related physical and derivatives positions, including positions obtained while in possession of confidential information. By attempting to manipulate such benchmarks, Vitol was also attempting to manipulate —and would have distorted—numerous futures, swaps, and other derivatives and physical trades that price in reference to those benchmarks. If successful, such conduct would have been to the detriment of market participants who held opposing positions—including Vitol’s counterparties—or those who rely on the benchmarks as an untainted price reference for U.S. physical or derivative trades.

The order recognizes Vitol’s cooperation with the Division of Enforcement’s investigation in the form of a reduced civil monetary penalty. 

The Division of Enforcement staff members responsible for this case are Ilana Waxman, Allison Passman, Gates S. Hurand, Matthew Edelstein, Patrick Marquardt, Scott Williamson, Robert Howell, Neel Chopra, and former staff member Elise Kent Bernanke. Staff member Doug Snodgrass, former staff member Daniel J. Grimm, and the Division’s Trading and Information Protection Task Force also assisted with this matter.

* * * * * * *

CFTC’s Foreign Corrupt Practices Advisory

The CFTC’s Division of Enforcement issued an advisory on March 6, 2019 [See CFTC Press Release No. 7884-19] on self-reporting and cooperation for CEA violations involving foreign corrupt practices. As set forth in the advisory, where a company or individual not registered or required to be registered with the CFTC voluntarily discloses violations of the CEA involving foreign corrupt practices, provides full cooperation and appropriately remediates, the division will apply a presumption that it will not recommend the CFTC impose a civil monetary penalty in resolution of an action, absent aggravating circumstances.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.

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Regulator Information

Abbreviation: CFTC
Jurisdiction: USA

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