Merrill Lynch Charged in Copper Scheme
Federal regulators charged Merrill Lynch & Co. on Thursday with allegedly helping a commodities firm manipulate the world copper market.
The Commodity Futures Trading Commission said Merrill Lynch worked with New York-based Global Minerals & Metals Corp. and Japan’s Sumitomo Corp. to artificially force prices higher in late 1995.
Geoffrey Aronow, the enforcement director for the CFTC, said Thursday’s action capped a three-year investigation of “one of the most serious worldwide manipulations” of a commodity in 25 years.
Merrill Lynch denied the allegations and said it will defend itself. The nation’s largest brokerage said it fully cooperated with the CFTC’s investigation and was “extremely disappointed” that the agency decided to proceed with charges.
The CFTC also announced charges against Global Minerals and the commodities firm’s president, chief executive and chief copper trader.
Peter Haveles, an attorney for New York-based Global Minerals, didn’t immediately return a telephone call seeking comment.
The case stems from a scandal that rocked the world copper market in 1996, based on trades that occurred as much as 10 years earlier.
Yasuo Hamanaka, a former Sumitomo star trader who has been convicted of fraud and forgery by a Japanese court, caused $2.6 billion in losses in unauthorized copper trading over a decade after cornering as much as 5% of the market. When the losses were exposed in 1996, copper prices plunged.
Traders have said Hamanaka’s activities kept the price of copper high on the New York and London futures markets in 1995 and 1996.
In a related move a year ago, Sumitomo agreed to pay $150 million to settle the CFTC’s charges that it manipulated the world copper market. The big Japanese trading house also agreed to pay $8 million to British regulators.
The CFTC filed a civil complaint against the companies and individuals, asking for a hearing before an administrative law judge at the agency to determine if the charges are true and what penalties may be appropriate.
Possible penalties include civil fines and an order requiring the companies and individuals to refrain from future violations.
