US attorney Korein Tillery has filed a class action lawsuit against ethanol producer Archer Daniels Midland (ADM) for the alleged manipulation of a key benchmark for the settlement and pricing of ethanol futures and options.
The lawsuit, which was filed in the United States District Court for the Central District of Illinois, is for violations of the Commodity Exchange Act, dating back to as early as November 2017.
The pricing, settlement and value of ethanol futures and options contracts are tied to the Chicago Ethanol (Terminal) price, which is determined every day by S&P Global Platts during a half-hour trading period for ethanol at the Kinder Morgan fuel terminal in Argo, Illinois.
Filed on behalf of energy trading company AOT Holding, the complaint alleges that ADM took outsized short positions in ethanol derivatives, betting that the price of ethanol would decrease.
ADM reportedly then aggressively sold ethanol during the 30-minute period at the Argo terminal at prices lower than what the company could have received elsewhere, and even below ADM’s own variable cost of production, in order to manipulate the Chicago Ethanol (Terminal) price downward.
This manipulation in turn artificially increased the value of ADM’s massive short positions in ethanol derivatives, enabling the company to gain outsized profits despite low or negative margins on physical sales of ethanol.
On behalf of itself and a class of persons who traded in or settled positions in these ethanol futures and options contracts, AOT Holding alleges that ADM’s manipulation of the price at the Argo terminal violated the Commodity Exchange Act, resulting in hundreds of millions dollars in damages to the plaintiffs.
AOT Holding is seeking actual damages, in addition to punitive or exemplary damages, for both itself and the proposed class. A full copy of the complaint can be found here.
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