Class action lawsuit alleges ADM manipulated ethanol futures

By Korein Tillery | September 05, 2019

Korein Tillery attorneys filed a class action lawsuit against Archer Daniels Midland Co. in the United States District Court for the Central District of Illinois, alleging that ADM has manipulated a key benchmark for the settlement and pricing of ethanol futures and options contracts dating back to as early as November 2017, in violation of the Commodity Exchange Act.

The pricing, settlement, and value of various ethanol futures and options contracts are tied directly to the so-called Chicago Ethanol (Terminal) price. This Chicago Ethanol (Terminal) price is determined daily by S&P Global Platts during a 30-minute trading period for ethanol at the Kinder-Morgan fuel terminal in Argo, Illinois.

The complaint filed on behalf of Korein Tillery client AOT Holding AG, alleges that ADM took outsized short positions in ethanol derivatives, betting that the price of ethanol would decrease. ADM then aggressively sold ethanol during the 30-minute window at the Argo Terminal at prices that were below what ADM could have received elsewhere and even below ADM’s own variable cost of production in order to manipulate the Chicago Ethanol (Terminal) price downward. ADM’s downward manipulation of the Chicago Ethanol (Terminal) price in turn artificially increased the value of ADM’s massive short positions in ethanol derivatives, thus allowing ADM to reap outsized profits despite low or negative margins on physical ethanol sales.

AOT Holding AG, on behalf of itself and a class consisting of all persons who traded in or settled positions in these ethanol futures and options contracts, alleges that ADM’s manipulation of the Chicago Ethanol (Terminal) price at the Argo Terminal violated the Commodity Exchange Act and caused hundreds of millions of dollars in damages to entities that traded in ethanol futures and options contracts tied to the Chicago Ethanol (Terminal) price. AOT Holding AG seeks actual damages, as well as punitive or exemplary damages, on behalf of itself and the proposed class. Korein Tillery’s investigation of this matter is ongoing.

Individuals or companies who traded in: (1) Chicago Ethanol (Platts) Futures (CME symbol: CU); (2) Chicago Ethanol (Platts) Average Price Option (CME symbol: CVR); and/or (3) the Ethanol Futures Contract (CME symbol: EH) from Nov. 1, 2017 to the present and who are interested in discussing the lawsuit or any damages they incurred in the ethanol markets during this timeframe are encouraged to contact George Zelcs (312-641-9750; gzelcs@koreintillery.com).

The case is AOT Holding AG v. Archer Daniels Midland Company, No. 19-cv-02240 (C.D. Ill.) (Bruce, J.). A copy of the complaint can be found at this link.