‘Please don’t tell’

At 3:29 p.m. on April 20, 2020 — the only day that oil prices have ever dropped below zero — a British trader sent a message to his buddies: “We pushed each other so hard for years for this one moment … And we f[******] blitzed it boys.”

Moments earlier, one of his colleague wrote on their WhatsApp message group, “Please don’t tell anyone what happened today lads x.”

Those written exchanges among traders dubbed the “Essex Boys,” who made $700 million when oil collapsed, were cited by a US judge who gave the green light to a proposed class-action lawsuit filed against them in August 2020. His ruling was unsealed Tuesday in Chicago.

The suit by Mish International Monetary alleges 12 men associated with Vega Capital London manipulated markets and violated antitrust laws by colluding to push the market down. Mish, a buyer that day, says it lost money. For their part, the defendants, who range in age from their early twenties to their late fifties, say they are independent traders who were simply following “blaring” market signals.

US District Judge Gary Feinerman rejected a motion by the traders to dismiss the case, saying it could proceed against eight of the 12.

“The content of their communications, along with the high degree of correlative trading among most of them, give rise to a highly plausible inference of an agreement among them,” the judge wrote in his unsealed order, which included excerpts of messages between the traders.

Feinerman dismissed the case against four of the traders and against Vega Capital, but he said Mish can amend its complaint against them by April 28.

An investigation by Bloomberg News in 2020 showed the traders at Vega Capital, a small firm on the outskirts of London, lived mostly in the same neighborhood in Essex and were brought together by an experienced pit trader named Paul Commins, who was known as “cuddles.”

Trading data show that several of their transactions on April 20, 2020, were “highly correlated,” according to the suit, with between 96.2% and 99.7% moving “in the same direction at the very same time.” Between 1 and 1:30 p.m., when the market closed, the 12 men were responsible for 29.2% of the total volume in WTI crude oil futures, a vast global market, according to the suit.

Their trading coincided with a collapse in the price of WTI futures, from $56 a barrel at the start of the day to -$37 when the market closed.

Messages on their WhatsApp group, which was titled ‘Legends XXX,’ show the traders were pushing to get prices lower and exchanging information about their positions, according to the court filing.

‘Keep selling’

“Just keep selling it every 5 points,” one trader said. “You’ve just got to keep selling,” said another. “Everyone is going to be short and have ammo,” read another. “F[******] mental. I wanna see negative WTI prices,” read another.

The traders have argued they were just taking advantage of the opportunities presented by a fast-moving market. “Unprecedented offers presented speculators with an almost guaranteed profit opportunity,” according to one filing. “Astute traders could sell at negative prices and buy back at potentially even lower negative prices, earning a profit on the spread.”

The judge’s decision opens the door to discovery, meaning the plaintiffs will have access to more of the group’s trading records and communications. They will also have an opportunity to depose the men under oath.

The case is Mish International Monetary v. Vega Capital London, 20-cv-04577, U.S. District Court, Northern District of Illinois (Chicago)

© 2022 Bloomberg

Source: moneyweb.co.za