Dan Shak Banned For Manipulating Oil MarketsNovember 26, 2013 12:06 pm
Hedge fund manager Daniel Shak, 54, has received a partial ban from some forms of trading after it was discovered he had attempted to manipulate the oil markets back in 2008. In addition to the ban, the SHK Management LLC owner was also saddled with a $400,000 bill for violating the Commodity Exchange Act.
Apparently, the hedge fund manager turned poker pro used a method referred to as “banging the close” to drive up the price of stocks just before Trading at Settlement, with the US Commodity and Futures Trading Commission (CFTC) website defining the practice as:
“A manipulative or disruptive trading practice whereby a trader buys or sells a large number of futures contracts during the closing period of a futures contract (that is, the period during which the futures settlement price is determined) in order to benefit an even larger position in an option, swap, or other derivative that is cash settled based on the futures settlement price on that day.”
The practice was found to have been carried out over a two-day period back in 2008 by Dan Shak and another trader at SHK Management LLC whilst trading on the New York Mercantile Exchange (NYMEX). As a result, Shak has now received a total ban on trading in regulated crude oil markets, in addition to a two-year ban from trading “naked futures,” as opposed to a covered position in which a securities position is hedged from market risk.
Dan Shak famously made the news in 2011 when his $10 million hedge fund sold $850 million worth of gold contracts (10% of the US gold futures market) which subsequently sent the entire gold market in a downward spiral, resulting in a 70% loss for his fund, equivalent to $7 million. When later discussing the incident, Shak offered this tip:
“Never try to pick the price of gold. History shows it takes a year to go up, and three days to go down.”
These days, Shak attracts more attention for his life as professional card player, with the Las Vegas-based pro having earned $5,678,116 from live tournaments, including in 2010 winning the $100k Aussie Millions Poker Championship for $1,107,553.