Power & Pipes

FERC, CFTC, and State Energy Law Developments

The Commodity Futures Trading Commission (CFTC) announced last week that it has obtained another admission from a trader of violations of the Commodity Exchange Act and CFTC regulations, demonstrating its continued aggressive enforcement of its market anti-manipulation provisions.

Emilio José Heredia Collado (Heredia) of Lafayette, California, admitted to engaging in the manipulation of a US price-assessment benchmark relating to physical fuel oil products for more than four years while employed as a fuel oil trader for a trading company. The CFTC imposed a permanent ban from trading commodity interests or engaging in other related activities and a $100,000 civil monetary penalty and made a criminal referral to the US Department of Justice.


Section 6(c)(1) of the Commodity Exchange Act (7 USC § 9(1)), as amended by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, includes an anti-manipulation provision. The CFTC promulgated a companion regulation at 17 CFR § 180.2 (Rule 180.2). These anti-manipulation provisions make it unlawful for any person to use or employ, or attempt to use or employ, any manipulative or deceptive device or contrivance in connection with any swap, contract of sale of any commodity in interstate commerce, or future delivery on or subject to the rules of any registered entity. Covered actions include fraudulent schemes or making untrue or misleading statements of material fact.

As we discussed in December 2020 and February 2021, the CFTC has aggressively pursued market manipulation schemes and has committed to making criminal and civil referrals to partner federal and state enforcement agencies in parallel with its civil enforcement efforts.

Heredia’s Market Manipulation Scheme

Between June 2012 and August 2016, Heredia was employed as a fuel oil trader engaged in and overseeing trading of a variety of fuel oil products. Among the trades engaged in or overseen by Heredia were numerous trades with state-owned enterprises, including those for delivery to and from the Los Angeles market.

During the relevant period, more than approximately 100 such trades were priced in reference to a benchmark price assessment determined by Platts called the Bunker Fuel Oil 380 CST 3.5% Ex-Wharf Los Angeles (Los Angeles Bunker Benchmark). Platts reported the daily Los Angeles Bunker Benchmark as part of its subscription market-reporting services. Platts generally determined the Los Angeles Bunker Benchmark for a given day based on bids to purchase, offers to sell, and trades in bunker fuel during a defined reporting window. Platts reported to market participants before the start of the trading day a market price level, which would usually serve as the starting price for Platts-authorized market participants’ bids or offers.

During the relevant period, Heredia and others at the trading company would distort the prices of the trades in the company’s favor. Specifically, Heredia and others would submit increasing bids or generally decreasing offers to Platts during the trading window, which Platts then reported, and which the CFTC found created an artificial price. The company could then buy at artificially low or sell at artificially high prices. For example, over a period of a few days, Heredia and others he directed successively increased bids nearly 60 times that artificially inflated the benchmark by $8.50 to $26.50 per metric ton, and then executed sale orders for 40,000 metric tons of fuel oil in that period. The scheme earned Heredia several hundred thousand dollars in improper additional revenue.

The CFTC found, and Heredia admitted, that these actions constituted unlawful market manipulation. The CFTC permanent banned Heredia from trading commodity interests or engaging in other commodity-related activities. The CFTC also assessed a $100,000 civil monetary penalty.

Further, following the CFTC’s trend of making criminal referrals, the Department of Justice’s Fraud Section announced a criminal charge against Heredia in the US District Court for the Northern District of California. United States v. Heredia, Case No. 21-CR-0109 (N.D. Cal.). Heredia pleaded guilty to one count of conspiracy to manipulate the price of a commodity in interstate commerce in violation of the Commodity Exchange Act.