On December 3, 2020, in a landmark decision, the CFTC announced that it resolved its first enforcement action related to foreign corruption when it settled with the Texas-based commodities trader Vitol, Inc. A parallel FCPA suit was brought by the DOJ.
In the CFTC Order, Vitol consented to the entry of findings that it “engaged in conduct designed to increase profits from physical and derivatives trading in the global oil markets through corruption, fraud, and manipulation.”
The Order further requires Vitol to pay over $95 million in civil penalties and disgorgement, which will be partially offset by the criminal penalties and related fines ordered by the DOJ and Brazilian authorities totaling $164 million.
Additionally, Vitol agreed to settle CFTC charges related to energy market manipulation for $16 million and pay nearly $13 million in disgorgement.
The CFTC’s charges are based on a series of bribes and kickbacks paid by Vitol between 2005 and 2020 to state-owned oil companies in Brazil, Mexico, and Ecuador. To conceal the bribes, Vitol funneled the corrupt payments to shell companies or through offshore bank accounts. In return for the bribes, Vitol was given access to confidential information regarding the companies’ oil pricing and competitor information.
Vitol was thereby able to consistently beat the best price offered by its competitors and profited millions as a result. Furthermore, Vitol attempted to manipulate “benchmarks,” which are used by market participants as a price reference, by engaging in trading activity at prices and in a manner intended to influence the benchmarks in order to benefit its related positions.
The order indicates that Vitol’s conduct, through both its bribery scheme to access confidential information and its trading scheme to influence benchmarks, violated the anti-manipulation and anti-fraud provision of the Commodities Exchange Act: Section 6(c)(1) of CEA and CFTC Regulation 180.1.