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A group of British oil traders known as the “Essex Boys” have proposed donating £1mn to charity to end the UK financial watchdog’s investigation into whether they colluded to reportedly make hundreds of millions of dollars in a few hours as oil prices plummeted during the 2020 pandemic.
The Financial Conduct Authority said on Wednesday that, following its investigation, it was concerned that the traders may have co-ordinated their strategies and/or exchanged potentially sensitive information, in breach of competition law.
But it said it was planning to end its probe as it had received a number of commitments from the group. It added that their proposed donation to the Crisis and Resilience Fund, a government fund that supports people suffering financial hardship, was enough to “ensure that deterrence is not undermined”.
The self-employed traders living in Essex were members of a trading group called Futures Trading Facilities, which was dissolved in 2022. They used a so-called trading arcade to get access to energy futures markets, in which they placed speculative bets on the price of oil and other commodities. Members of the arcade had separate brokerage accounts and worked for themselves.
The vast profits made in only a few hours by the group have prompted lawsuits and regulatory fines on both sides of the Atlantic.
A number of the traders have been sued in the US for allegedly being part of a wider group that caused an unprecedented crash in oil futures markets to earn more than $700mn by colluding to drive the price of crude oil futures briefly into negative territory in April 2020.
In the past year, seven of the traders have also agreed to pay fines of between $35,000 and $100,000 each and accept bans as part of settlements with CME Group, owner of the New York Mercantile Exchange that handles many of the world’s oil futures trades.
The FCA said its probe raised concerns the traders “may have hindered competition in commodity futures markets and infringed competition law by exchanging potentially sensitive information about their trading and/or coordinating their trading strategies with each other”.
It said that possible co-ordination “also included more occasional, ‘in the moment’ co-ordination where a party disclosed their current or future actions and the receiving party confirmed that they would follow that course of action”.
But the FCA said it decided to drop its lawsuit in return for the £1mn donation to charity, as well as commitments from the traders to undertake annual training on competition law and not to share sensitive information.
The watchdog is inviting comments on its proposed agreement with the 11 traders, which it said was “likely to exceed any penalty the FCA could impose on the individuals following any infringement finding”.
It added that its agreement with the traders “does not constitute an admission of any wrongdoing” or any indication that they agree with the FCA’s concerns. The watchdog said it had “made no determination as to the existence of an infringement of competition law”.
“Competition law exists to ensure markets work well,” said Graeme Reynolds, FCA director of competition. “We consider all competition concerns and, where appropriate, we investigate and take action.”
Dechert, which represents the traders, said it was pleased with the FCA decision, adding: “This voluntary contribution is not a fine or a penalty. As the FCA explained in its announcement, the intended resolution involves no finding or admission that our clients breached any law or regulation.”
