Please don’t tell anyone what happened today lads x.
That’s among the standout lines in chat logs released on Tuesday as part of litigation against UK traders accused of engineering an oil futures crash. A class-action lawsuit filed by rare coin shop Mish International Monetary alleges that traders associated with Vega Capital London made out like bandits when crude oil futures dropped $56 a barrel into negative territory ahead of expiry on April 20, 2020. Bloomberg’s regular coverage has dubbed them the Essex Boys.
It’s alleged that the defendants (whose identities are being kept secret by court order) conspired to pile into Trading at Settlement contracts, which can be bought at any time and are price-pegged to a daily settlement window that begins two minutes before 1:30pm Central. They’re then alleged to have forced the WTI price towards its historic low by acting in “virtual lockstep” to flood the market. The complaint estimates that for the half hour heading into expiry the group was dumping 153.5 contracts per minute and accounting for more than 30 per cent of total volume. At the point the trades settled, it’s alleged, the defendants effectively bought a dip they conspired to deepen.
The next day’s WTI rebound from minus $37 to about $10 a barrel landed the traders a huge windfall. The ruling, unsealed on Tuesday, includes estimates of a $632,814,390 profit on Chicago Mercantile Exchange options and a further $71,880,100 on the Intercontinental Exchange.
Mish argues that the defendants manipulated markets and breached antitrust laws. The defendants are arguing that they were independent traders who did no more than what was obvious at the time.
For insight into the question of whether there was coordination between traders, the court has been asked to consider message transcripts including a “Legends XXX” WhatsApp group:
Traders 9 and 12 communicated via text message on April 20. Between 10:51 a.m. and 12:00 p.m., the messages included: “Just keep selling it every 5 points,” “You’ve just got to keep selling,” “I just sold a load more s[***] at 14,” “I was on the phone to [a person likely to be Trader 4],” “Everyone is going to be short and have ammo,” and “I’ve got 300 left for late.”
Traders 4, 6, and 9 communicated on April 20 via a WhatsApp group titled “Legends XXX.” Among other things, Trader 9 wrote: “I’m short 160 spreads and 40 wti … . Are you boys adding to this.” Trader 6 responded: “I’m short 1250 and 500 not doing anymore until late.” Trader 9 then stated: “I’m 1100 and 310.” And Trader 4 stated: “1300 and 500.” Trader 6 stated that he had “200 for late,” and Trader 9 said, “Ok cool I will do the same.” Trader 9 mentioned that the market showed a one cent bid, and he sold 500 ICE May contracts two minutes later.
[ . . . ]
Traders 1 and 5 communicated on April 20 via WhatsApp. At 7:36 a.m., Trader 1 wrote: “If you need to do anything let me know.” Trader 5 responded: “Okay cheers fam can do ti [WTI futures contract] here.” At 9:20 a.m., Trader 5 asked Trader 1 if he “sold ti front yet,” and Trader 1 responded, “Yep 50 lots … Have you.” Trader 5 replied, “yea sold it.” About ten minutes later, Trader 5 asked, “is everyone short ti front,” and Trader 1 responded, “Yep but not loads.” At another point, Trader 1 stated: “If you want to do anything or a load of tas trade I’ll let you know.” Trader 5 responded: “I’m doing a fortune on tas haha.”
At 3:13 p.m. on April 20, Trader 2 texted persons likely to be some of the Trading Defendants: “Please don’t tell anyone what happened today lads x.” At 3:29 p.m. on April 20, Trader 9 stated to persons likely to be some of the Trading Defendants: “We pushed each other so hard for years for this one moment … And we f[******] blitzed it boys.”
Of the 12 traders, Judge Gary Feinerman dismissed the case against four who don’t appear in the chat logs, saying evidence was insufficient to tie them to the alleged conspiracy. Vega and its owner are also tentatively off the hook, the firm having been found to act only as a market-maker. For the others, “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,” Feinerman found.
Mish has until April 28 to amend its complaint and refile the dismissed bits. The full docket’s available here x
Oil goes sub zero – FT Alphaville
Unprecedented oil commentary – FT Alphaville