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Former Delta executive settles CFTC trading case

Jon Ruggles, who ran the fuel-hedging program for Delta Air Lines, on Thursday settled charges that he made illicit energy trades in a personal account while handling similar trades when he worked at Delta, according to legal documents filed today by the Commodity Futures Trading Commission.

Ruggles, who neither admitted nor denied the CFTC's findings, agreed to disgorge more than $3.5 million in trading profits and pay a $1.75 million penalty for the unlawful behavior, according to the documents. The former hedger is also permanently banned, the documents state, from registering with the CFTC or trading on the various platforms it regulates.

Ruggles, who left Delta late in 2012 and whose hedging and trading factored prominently in this reporter's book, "The Secret Club that Runs the World," didn't respond to a request for comment. A spokesman for Delta could not immediately be reached.

In early 2011 and through most of 2012, Ruggles was the chief architect of Delta's fuel-hedging strategy. Having lost money in the aftermath of the financial crisis on wrong-way bets on the future price of jet fuel — a commodity that's often hedged using a basket of other energy contracts, including crude oil and RBOB gasoline — Delta's executives were looking for a fresh approach at that time. Ruggles, who had had experience both in the professional trading world and at oil and gas companies, seemed a good fit.

His hedges were effective during the first year. But over time, Ruggles was less successful in mitigating the airline's costs, and at the same time, the CFTC argues in documents, he was making personal trades that could be helped by his insider knowledge of what trades were planned for Delta.

On at least 71 days in 2012, the documents argue, Ruggles used "material, nonpublic information regarding his trading on behalf of his employer to trade for his own personal benefit." Using an account in his own name as well as one in his wife's, Ruggles "sequenced his trading on these days in these personal accounts and his employer's accounts, all of which he controlled, so that the majority of the orders he placed in these personal accounts were executed against the orders he placed for his employer." The rest, the documents state, were filled by other trading parties at the same, pre-set, prices.

Earlier this year, Ruggles was sanctioned by the CME Group for the same set of activities. He was also permanently barred from membership there.