The Collapse of Amaranth Advisors

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Case Details:

Case Code : FINC063
Case Length : 18 Pages
Period : 2000-2009
Pub. Date : 2010
Teaching Note : Available
Organization : Amaranth Advisors
Industry : Investment Banking
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

The Commodity Futures Trading Commission (CFTC)⁷ and Federal Energy Regulatory Commission (FERC)⁸ had filed the lawsuit against Amaranth and two of its traders - Matthew Donhoe (Donhoe) and Brian Hunter (Hunter), alleging that they had manipulated natural gas market prices through their trading activities in February and April, 2006. CFTC had originally sought US$ 20 million and FERC had sought US$ 291 million in fines from Amaranth and its traders. However, they later agreed to settle the charges against Amaranth and Donhoe for a total of US$ 7.5 million as they felt that the defunct Amaranth would not be able to pay such high penalties with its assets already having been liquidated.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

The charges against Hunter, however, continued with CFTC and FERC complaining that the bets placed by him had been huge and had led to the collapse of Amaranth...

Excerpts >>

7] The Commodity Futures Trading Commission is an independent agency in the US with a mandate to regulate commodity futures and options trading in the country. It was formed in 1974 by the US Congress.
8] The Federal Energy Regulatory Commission is a United States Federal Agency that regulates the interstate transmission of electricity, natural gas, and oil in the US. It was formed in 1977.

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