## Facts

- A hedge fund, Amaranth Advisors LLC, traded very large natural gas futures positions on NYMEX and collapsed in 2006 after substantial losses.
- A putative class of natural gas futures traders alleged that Amaranth and its head natural-gas trader manipulated NYMEX settlement prices in violation of the Commodity Exchange Act (CEA).
- J.P. Morgan’s futures affiliate acted as Amaranth’s futures commission merchant and clearing broker, providing clearing, margin, and related financing services.
- Plaintiffs alleged the broker enabled the manipulation by extending credit, accommodating margin and risk-limit exceptions, and continuing services despite warning signs of unusual risk.
- Plaintiffs sued for private damages under CEA § 22(a), asserting the broker aided and abetted Amaranth’s manipulation.
- The district court dismissed the aiding-and-abetting claim under Rule 12(b)(6), and plaintiffs appealed.

## Issues

1. Whether the amended complaint plausibly alleged a private aiding-and-abetting claim under CEA § 22(a) against the clearing broker, including actual knowledge of manipulation and substantial assistance.
2. Whether the district court applied an improperly demanding pleading standard to the aiding-and-abetting allegations.

## Decision

- The Second Circuit affirmed dismissal of the CEA aiding-and-abetting claim.
- The complaint did not plausibly allege the broker’s actual knowledge of Amaranth’s manipulative scheme, as opposed to knowledge of aggressive or risky trading.
- The complaint did not plausibly allege substantial assistance because the alleged conduct amounted to ordinary clearing, margin, and financing services not shown to be intentionally directed to further manipulation.
- The court declined to decide whether a heightened pleading rule applied because the claim failed even under the more permissive standard urged by plaintiffs.

## Legal Principles

- A private aiding-and-abetting claim under CEA § 22(a) requires pleading: (1) a primary CEA violation, (2) the defendant’s actual knowledge of the violation, and (3) substantial assistance in its commission.
- Actual knowledge is required; allegations supporting only constructive knowledge, negligence, or awareness of trading risk are insufficient.
- Substantial assistance requires conduct intentionally directed to the success of the unlawful scheme; routine professional or intermediary services (including clearing and margin/financing) generally do not suffice without facts showing purposeful facilitation.
- Profit motive and maintaining a lucrative client relationship, without specific facts showing shared unlawful intent or knowing participation, do not establish aiding-and-abetting liability.

## Conclusion

The Second Circuit held that allegations a clearing broker provided margin, credit, and clearing services to a high-risk customer—without plausible facts showing actual knowledge of market manipulation and purposeful assistance—do not state a private aiding-and-abetting claim under CEA § 22(a).


In re Amaranth Nat. Gas Commodities Litig., 730 F.3d 170 (2d Cir. 2013)