Currently unknown investors netted tens of millions of dollars in profit by placing huge trades in the oil futures markets just 15 minutes before President Donald Trump announced he was extending the deadline for strikes on Iran's energy infrastructure by five days to allow for nonexistent "negotiations" (which then turned into an additional 10 days—which meant little since U.S. and Israeli bombing simply continued). Because these investors bet on a fall in oil prices, they made money when the price of oil dropped sharply after the announcement.
The same or other investors traded heavily in stock index futures before the Iran announcement and profited handsomely as stock futures soared. All these investors could end up in legal jeopardy for engaging in insider trading if they were somehow given a heads up about the announcement. Were their trades just coincidental to the announcement? It seems unlikely, but that's the big question an investigation would answer.
Those traders may have imagined that they would never have to answer for their conduct. The U.S. Department of Justice under any Trump-appointed attorney general won't investigate any matter involving possible illegal conduct linked to Trump. And, the traders may believe they would likely escape prosecution by a future administration as it struggles to investigate and bring charges before prosecutors run out of time. The statute of limitations—that is, the deadline for bringing charges in such matters at the federal level—is five years.
But those traders may have miscalculated. It turns out New York state has a powerful and effective tool for prosecuting securities fraud called the Martin Act. And, Letitia James, attorney general for New York state, has actually been on the case for months. (Yes, it's the same Letitia James who successfully sued Trump for fraud and who has been targeted through bogus unsuccessful indictments by the Justice Department.)
What a minute, you must be saying, how can it be possible for James to have been on the case for months when the suspicious trades took place a couple weeks ago? The answer is that James started investigating highly profitable impeccably timed trades linked to Trump announcements after Trump's reversal on tariffs last April. While there has been no information about whether these latest trading incidents will be included in the New York investigation, it's hard to imagine that investigators will just ignore them.
But how can New York state have jurisdiction? Isn't this a federal matter? First, states have securities fraud laws. Some laws are lax, but New York's Martin Act is expansive and powerful. Second, of those suspicious trades, the biggest trade in oil took place on the New York Mercantile Exchange. I'll bet you can guess where that's located. Actually, it turns out that all of the trades took place on exchanges that have offices in New York city. It seems the traders involved weren't thinking about the legal jurisdiction under which their trades would fall.
Perhaps the most powerful element of the Martin Act is that prosecutors do NOT need to prove intent. That is, they don't need to demonstrate what was going in the mind of the defendant. Federal securities fraud cases are much harder to make because intent must be established. In Martin Act prosecutions the prosecutor need only prove that the result was deceptive or fraudulent regardless of what was in the mind of the perpetrator.
Maybe you're wondering why anyone other than wealthy traders ought to be concerned with such matters, especially with a war raging in the Persian Gulf and a vital link to world energy exports, the Strait of Hormuz, closed thereby depriving global industrial society of a huge portion of its fossil fuel energy needs. My answer is that the ever increasing power of the rigged casino of international finance de-emphasizes the world of physical resources and production, the things which actually matter to our physical wealth and well-being. Instead, the wealthy make themselves richer by manipulating the symbols of wealth (stocks, bonds and other financial instruments such as futures contracts) while the material circumstances of the poor and middle classes are undermined with every passing day.
If there are no rules for the rich, only the rest of us, then everything in society becomes optimized for the rich including the fighting of expensive and, as it turns out for some, highly profitable wars regardless of the consequences for society as a whole.
Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Naked Capitalism, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He can be contacted at kurtcobb2001@yahoo.com.
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