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Ex-Shell Gas Trader Pleads Guilty Over Role in Scheme

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Michael Tobin and Sergio Chapa
·2 min read
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(Bloomberg) -- A former Royal Dutch Shell Plc natural gas trader in Houston pleaded guilty to a criminal charge related to his role in an illegal scheme that started in 2013 in which he sought to profit by using non-public information obtained from the company.

Marcus Schultz disclosed the information to other traders and brokers in a conspiracy to profit from fraudulent gas futures trades, the Justice Department said in a federal court filing in Houston. His guilty plea was announced earlier this week by the Justice Department.

Prosecutors said some of Schultz’s trading occurred around the U.S. Energy Information Administration’s weekly gas storage report, which can move prices by signaling whether the market is bullish or bearish based on underground inventories.

From April 2013 to February 2016, Schultz used his company’s material non-public information to enter into fictitious trades, according to the Commodity Futures Trading Commission. At that time, Schultz worked for BG Group Plc, according to court filings and a company document. Shell completed its takeover of BG in 2016.

Shell Energy North America assisted the Justice Department and the CFTC with their investigations into Schultz, the company said in an emailed statement. His attorney declined to comment.

In a related case, former gas trader John Ed James pleaded guilty on Monday to one count of conspiracy to commit commodities fraud and wire fraud, the Justice Department said in a statement. Those trades happened while working at an unidentified company. The trades James arranged with others generated almost $1 million in illicit proceeds, the Justice Department said. James’s attorney declined to comment.

The scheme involved offsetting trades, which are opposite transactions for an equal number of contracts of the same delivery month, prosecutors said. By offsetting, traders can cancel delivery of the underlying commodity and profit off the difference between the price of the futures contract when the trade was initiated and the price when it was offset. Schultz pleaded guilty in July to conspiracy to commit wire fraud, the Justice Department said in the statement Monday.

In September, the CFTC said it settled charges against Schultz for misappropriating his employer’s confidential information to enter into fictitious trades. The order required Schultz to pay a civil penalty of almost $670,000 and repay about $427,000.

“There is no place in our company for this kind of behavior and that individual’s employment was terminated. We have fully cooperated with the authorities,” Shell said. The company is a major gas trader and operates one of the world’s largest fleets of liquefied natural gas carriers.

The case is United States of America v. Marcus Schultz, 4:20-cr-00270, U.S. District Court, Southern District of Texas (Houston)

(Updates with dates provided by the CFTC in the third paragraph)

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