U.S. commodity regulators are suing three companies and two individuals claiming they manipulated crude oil futures prices on the New York Mercantile Exchange over four months in 2008.
The Commodity Futures Trading Commission filed the civil complaint Tuesday in New York against Parnon Energy Inc., Arcadia Petroleum Ltd. and Arcadia Energy (Suisse) SA, and two men accused of directing the trading scheme: James T. Dyer of Australia and Nicholas J. Wildgoose of California.
Regulators claim the defendants traded futures and other contracts based on the price of West Texas Intermediate light sweet crude oil, a benchmark for crude oil prices.
Then they allegedly took steps to artificially drive the price up, then back down, reaping more than $50 million in unlawful profits.
The complaint seeks that the defendants give up profits from the scheme, among other penalties.
Regulators contend the defendants bought large quantities of oil, for which they had no commercial use, in order to artificially tighten the supply of crude oil at a major facility in Cushing, Okla. The supply at that facility is a key driver in the price of West Texas Intermediate light, sweet crude oil, so any tightening of supply moves prices higher.
With prices rising, the companies took a short position on oil derivatives and sold them off. Then, they'd sell off most of their oil in one day, pushing supplies higher and prices lower to profit from their short derivatives position, regulators claim.
The price manipulation scheme allegedly took place between January and March 2008, and the companies tried it again the following month.
That period of time coincided with a sharp run-up in oil prices, fueled by speculation that soaring growth from China, India and other emerging economies would drive demand for crude. A weaker dollar helped drive up prices to a record $147.27 a barrel on July 11, 2008, as investors dumped investments in the U.S. currency for crude.
Prices, which many industry analysts described as out of control, began to collapse shortly afterward as the world's biggest economies began to falter.
Pump prices hit the highest levels since 2008 earlier this month, but started falling as oil retreated from a high near $114 a barrel.
Still, the prospect of higher gas prices has prompted the Obama administration to step up efforts to crack down on fraud or manipulation in the oil markets.
President Barack Obama has ordered his Justice Department to form a task force to root out any abuses.