Full opinion text
OPINION AND ORDER SHIRA A. SCHEINDLIN, District Judge. Another great evil arising from this desire to be thought rich; or rather, from the desire not to be thought poor, is the destructive thing which has been honored by the name of “speculation;” but which ought to be called gambling. —William Cobbett I. INTRODUCTION Plaintiffs have filed this putative class action on behalf of a class of all entities that purchased, sold, or held natural gas futures or options on futures contracts between February 16, 2006 and September 28, 2006 (the “Class Period”) against the Amaranth family of companies, its brokers, its clearing house firm, and certain of their employees. Plaintiffs allege that during the Class Period, defendants manipulated the prices of New York Mercantile Exchange (“NYMEX”) natural gas futures contracts in violation of sections 6(c), 6(d), and 9(a)(2) of the Commodity Exchange Act (the “CEA”). Defendants now move to dismiss the Complaint. For the reasons discussed below, the motion is granted in part and denied in part. II. BACKGROUND A. Facts 1. Structure of the Amaranth Entities Hedge funds generally make use of complex structures that permit investors from within and without the United States to benefit from advantageous tax regimes without risking personal liability. The Amaranth fund is no exception. Investors invested directly into three “feeder” funds, Amaranth International Ltd. (“Amaranth International”), Amaranth Partners LLC, and Amaranth Capital Partners LLC (together with Amaranth International, the “Feeder Funds”). Foreign and tax-exempt investors invested in Amaranth International. Domestic tax-sensitive investors invested into Amaranth Partners LLC or Amaranth Capital Partners LLC. The Feeder Funds in turn invested their capital in Amaranth LLC (the “Master Fund”), a Cayman Islands corporation. The Master Fund was advised by Amaranth Advisors LLC. Advisors was owned in large part by Amaranth Management Limited Partnership (“AMLP”), a Delaware holding entity. Amaranth Group, Inc. (“AGI”), a Delaware corporation, was the general partner of AMLP. Brian Hunter and Matthew Donohoe, natural gas traders and defendants in this action, were employed by AGI, as was Chief Executive Officer Nicholas Maounis. Defendants established Amaranth Advisors (Calgary) ULC (with Amaranth Advisors LLC, “Amaranth Advisors”), a Canadian company and subsidiary of Amaranth Advisors LLC, to permit Hunter to move his trading operations to Canada. Defendants allege that although the Amaranth entities were legally distinct, they “were in practice a tightly knit association-in-fact, which operated as a single entity under the direction of Defendant Maounis.” For convenience, I refer to the collection of Amaranth entities as “Amaranth.” Hunter was the head natural gas trader at Amaranth and Donohoe was the execution trader. Essentially, Hunter determined the company’s investment strategy and Donohoe implemented that strategy. Defendant ALX Energy, Inc., a New York corporation, was Amaranth’s primary NYMEX natural gas floor broker. Amaranth was ALX’s largest customer. Defendant James DeLucia was Chairman or Chief Executive Officer of ALX. Defendants TFS Energy Futures, LLC and Gotham Energy Brokers, Inc. were also floor brokers for Amaranth (with ALX and De-Lucia, the “Floor Brokers”). Defendant LP. Morgan Futures, Inc. (“JPMFI”) served as Amaranth’s clearing broker. Its parent is defendant J.P. Morgan Chase & Co. (“JPMCC”). Finally, defendant J.P. Morgan Chase Bank, Inc. (“JPMCBI”) is a depository of NYMEX. 2. Structure of NYMEX and Futures Trading “NYMEX is the world’s largest commodity exchange for the trading of futures contracts and options contracts in energy products, metals, and other commodities.” Its operations are regulated by the Commodities Futures Trading Commission (“CFTC”). Contracts on the NYMEX relate to “crude oil, gasoline, heating oil, natural gas, electricity, propane, coal, uranium, environmental commodities, softs, gold, silver, copper, aluminum, platinum, and palladium.” Hundreds of thousands of contracts are traded each day. One type of contract traded on the.NY-MEX is a futures contract. A future is an agreement for the sale of a commodity on a specific date (the “delivery date”). Futures contracts for a given commodity are standardized; the only terms that vary are the delivery date and the price of the contract. Thus, “negotiations can readily proceed and the agreed prices can be speedily disseminated to other traders.” The seller of a futures contract is said to have the “short” side because she hopes that the price of the commodity will drop before the delivery date. The buyer has the “long” side. The term “spread” generally refers to the difference in price between two otherwise-identical futures with different delivery dates. Only a small percentage of futures transactions actually result in an exchange of money for a commodity. Most investors close out of their positions before the delivery dates. One way in which a trader can close a position is to enter into an offsetting contract. For example, a trader who holds a long position on one hundred tons of coal to be delivered on January 1, 2009, might enter into a separate short position on one hundred tons of coal to be delivered on that date. This avoids the possibility that someone might attempt to deliver one hundred tons of coal to the trader’s door. If the trader’s short position costs less than the long position, the trader has profited from the transaction. All futures transactions are executed through the NYMEX clearinghouse. Both parties to a transaction trade through a clearing member firm, a company that is a member of the clearinghouse. Thus, the parties do not transact directly — rather, the NYMEX clearinghouse sells to the buyer’s clearing firm and simultaneously buys from the seller’s clearing firm. In this way, neither party is exposed to credit risk from its counterparty. Rather, the clearing firm guarantees the client’s payment to NYMEX, and NYMEX guarantees payment to the counterparty’s firm. Because of this protection, before an entity can enter into futures contracts on the NYMEX, it must deposit funds, called “margin,” with a clearing firm to cover potential losses. A trader need not deposit the full amount of a potential loss on a futures contract, but only enough to cover the amount that the trader might foresee-ably lose in one day. The required margin amount is adjusted each day to reflect the day’s price changes. “This process, known as ‘marking-to-market’ the customer’s open position, determines whether a customer must post additional margin or, instead, receives payments on margin.” For example, a trader might have purchased the long position in a contract for delivery of two hundred and fifty pounds of uranium on October 31, 2008. The contract calls for a payment of $100 on that date. The trader is required to deposit some amount of money, say, $10. If the price of the futures contract (ie., the price that the market will currently agree to pay on October 31, 2008 for the right to receive two hundred and fifty pounds of uranium on that date) then falls to $95, the trader is facing a $5 loss. The clearing member firm might require the trader to make an additional deposit to insure against a further decline in the value of the contract. If the price were to fall to $90 before the trader makes additional deposits, the clearing firm might close out the trader’s contract — that is, it would enter into a contract for the delivery of two hundred and fifty pounds of uranium on October 31, 2008, at the market price of $90, on behalf of the trader. The trader would thus have a contract to receive the uranium and a contract to deliver the uranium on the same day, closing out its position and incurring a $ 10 loss. In order to calculate the appropriate margin and to recalculate the margin after each day’s trading, a clearing member firm must understand the trader’s outstanding positions and their relative risk. Just as a client must deposit margin with a clearing firm to protect the clearing firm, the clearing firms must deposit margin with the NYMEX clearinghouse. At the end of each trading day, NYMEX determines the amount that each firm must deposit by calculating the firm’s clients’ current exposure, adjusted for the day’s closing price of the contracts. Thus, each day NYMEX receives additional margin from firms whose clients have lost money and remits funds to firms whose clients have gained money. Futures are available for delivery dates months or years away. The price of futures tends to be fairly stable for delivery dates substantially in the future. “As a practical matter, the most actively traded and volatile contract months are those that are within a few months of a contract’s expiration.” Many traders are reluctant to trade during the last days of a contract because of this volatility. Besides futures, some traders enter into swaps. A swap is similar to a futures contract, although all swaps are financially settled. In a standard swap, a party agrees to pay a counterparty a fixed amount of money, and the counterparty agrees to pay the party a variable amount of money. Swaps can be structured to feature economics similar to commodities futures. For example, a trader might enter into a swap wherein the trader agrees to pay a counterparty $100 on October 31, 2008, and the counterparty agrees to pay the trader the price of two hundred and fifty pounds of uranium on that date. The price of the uranium would be the “notional principal.” The trader benefits as the price of uranium rises (the long position) and the counterparty benefits as the price falls (the short position). Swaps can be traded on the IntercontinentalExchange (“ICE”), which unlike NYMEX is not regulated by the CFTC. Extensive arbitrage generally keeps the prices of ICE swaps and the corresponding NYMEX futures in lockstep. Both swaps and futures are types of derivatives, so-called because their value derives from the value of the underlying commodity. 3. The NYMEX Market for Natural Gas One commodity traded on the NYMEX is natural gas. One NYMEX futures contract for natural gas represents ten billion British thermal units of natural gas. “The price is based on delivery at the Henry Hub in Louisiana, the nexus of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits.” The settlement price of a NYMEX natural gas future is the volume-weighted average price of trades during the thirty-minute settlement period, which is the last thirty minutes of trading on the “termination day.” The termination day is the third to last business day of the month preceding the month in which the contract matures. For example, September 2007 NYMEX natural gas futures settled from 2:00 p.m. to 2:30 p.m. on Wednesday, August 29, 2007. A trader who holds the long position in a natural gas futures contract at the end of the settlement period must “go to delivery,” that is, receive ten billion BTUs of natural gas at the Henry Hub in Louisiana. In Spring of 2006, less than two percent of natural gas futures contracts went to delivery. At all relevant times, natural gas futures were available for every month in the following six years, seventy-two contracts total. 4. Manipulation of the Natural Gas Markets During the Class Period, Amaranth controlled 40% of the outstanding NYMEX natural gas futures that matured for the months from October 2006 through March 2007. Amaranth trading represented almost 70% of total volume in those contracts. a. Self-Fulfilling Prophecy Manipulation To cause prices to rise, Amaranth would purchase extraordinarily large contracts. Amaranth held positions “of unprecedented size — in excess of an astonishingly large 123,000 futures equivalent contracts. By September 10, 2006, Amaranth had more than quadrupled its already unprecedentedly large positions to approximately 545,-365 natural gas contracts.” These large long positions signaled significant demand, causing market prices to rise. Plaintiffs allege that Amaranth purchased in strategic ways to inflate prices. For example, with respect to November 2006 contracts, on July 12, 2006 Amaranth was short by as much as 62,960 contracts. But by August 24, 2006, Amaranth had purchased 154,000 contracts — entirely closing out their short position and establishing a substantial long position. This compressed purchasing cycle caused prices for November 2006 (and other) contracts to rise. Plaintiffs also allege that Amaranth made specific large purchases, such as an acquisition of about 14,000 January 2007 contracts in seven days in February 2006, that caused significant price increases. b. Manipulation of Settlement Prices Plaintiffs further allege that Amaranth, with the knowledge and assistance of J.P. Morgan and the Floor Brokers, manipulated the settlement prices of natural gas futures in order to benefit their positions in swaps and other derivatives. During the last half-hour of trading for a given contract, and lacking any motive other than to affect the market price, Amaranth would sell a significant number of futures. This would artificially depress the settlement price of those futures. Amaranth profited because it held a short position in swaps traded on ICE and elsewhere that was substantially larger than its long futures position. Hunter and Donohoe orchestrated these trades knowing that Amaranth would lose money on the futures but would profit on the swaps. To maximize the intended effect, Hunter coordinated with the Floor Brokers, who were to consider in advance how best to structure the sales. For example, on February 24, 2006, the termination date for March 2006 natural gas futures, Amaranth’s sales deflated the settlement price of those futures by as much as twenty-nine cents, resulting in a profit of almost thirty million dollars. Many of the sales on that date were executed by DeLucia on behalf of ALX. Amaranth repeated these actions for the April 2006 natural gas futures market. By April 26, 2006, the termination date for the May 2006 contracts, Amaranth was long by about three thousand contracts. It also held a short position of about twenty-two thousand May 2006 swaps. Hunter became concerned that another hedge fund would purchase a large number of May 2006 contracts during the settlement period and thus drive up the price, reducing the value of Amaranth’s swaps. To counter this anticipated purchasing, Amaranth waited until the last eight minutes of trading and then instructed the Floor Brokers to sell Amaranth’s entire long position. Amaranth had no motive to delay these sales until the final minutes other than to increase their effect on the settlement price. The sale had the effect of lowering the May 2006 contract price by three cents. This trading pattern attracted the attention of NYMEX, which asked Amaranth to justify the last-minute sale of its long position. Amaranth responded with a letter that contained false justifications for its actions. NYMEX requires that no entity control a net long or short position in a contract that is due to expire within the month in excess of one thousand contracts. Further, when a position reaches a certain size, traders must disclose that position to NYMEX at its request and must stop trading if ordered. Amaranth repeatedly violated these limits and was warned several times by NYMEX, but did not heed these warnings. For example, Amaranth was instructed to reduce the size of its September and October 2006 futures contract holdings. While it did so, it increased its holdings in ICE swaps, effectively permitting it to evade the NYMEX limits. c. Collapse of the Amaranth Entities From July to September of 2006, Amaranth had taken a net long position in November 2006 natural gas futures. Amaranth incurred substantial losses as prices declined during this period. This decline degraded Amaranth’s margin. Natural gas prices collapsed during August and September of 2006. By mid-September, Amaranth lacked the liquidity to maintain its position and inflate prices. It thus began a series of secret meetings with investment banks wherein it sought to reduce its exposure to natural gas. Amaranth and the banks were not able to consummate a transaction, and on September 20, 2006, the J.P. Morgan defendants took possession of Amaranth’s natural gas positions. Amaranth’s clearing firm throughout the Class Period for both NYMEX and ICE was JPMFI. In accordance with industry practice, JPMFI analyzed Amaranth’s positions on a daily basis to recalculate Amaranth’s margin requirements. Thus, JPMFI was aware of Amaranth’s trading activity and Amaranth’s violation of NY-MEX’s limits. The J.P. Morgan defendants were also aware of NYMEX and CFTC investigations into Amaranth during the applicable period. Further, JPMFI repeatedly raised Amaranth’s credit limit to permit Amaranth to expand its trading in ICE swaps. B. Procedure This action was filed on July 12, 2007. Plaintiffs raise the following claims: • against the Amaranth defendants for violation of sections 6(c), 6(d), 9(a), and 22(a) of the CEA (count one); • against the Amaranth defendants for aiding and abetting and control person liability in connection with count one (count two); • against the Floor Brokers for aiding and abetting in connection with count one (count three); • against the J.P. Morgan entities for aiding and abetting in connection with count one (count four); and • against all defendants for unjust enrichment. Defendants now move to dismiss all of the claims on a variety of grounds. III. LEGAL STANDARD A. Personal Jurisdiction At the motion to dismiss stage, the plaintiff bears the burden of demonstrating that a court has jurisdiction over each defendant. Where, as in this case, plaintiffs have had minimal opportunity for discovery, the plaintiff need make only a pri-ma facie showing of jurisdiction “ ‘by pleading in good faith legally sufficient allegations of jurisdiction.’ ” “In a federal question case where a defendant resides outside the forum state, a federal court applies the forum state’s personal jurisdiction rules ‘if the federal statute does not specifically provide for national service of process.’ ” However, section 22 of the CEA provides for service of process “wherever the defendant may be found ...,” This language indicates a congressional intention to extend personal jurisdiction to the limit permitted by the Due Process Clause of the Fifth Amendment. To determine whether a proposed exercise of jurisdiction comports with due process, the court must conduct “an analysis consisting of two components: the ‘minimum contacts’ test and the ‘reasonableness’ inquiry.” The first component asks “ ‘whether the defendant has certain minimum contacts [with the forum] ... such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.’ ” The second component “ ‘asks ... whether it is reasonable under the circumstances of the particular case’ ” to assert personal jurisdiction. The Supreme Court has explained that purposeful availment is the cornerstone of personal jurisdiction — if a defendant has not purposefully availed himself of the “benefits and protections” of the forum’s laws, the defendant has little warning that they can be used against him. Further, a court “ ‘has the power to exercise judicial jurisdiction over an individual who causes effects in the [forum] by an act done elsewhere with respect to any cause of action arising from these effects unless the nature of the effects and of the individual’s relationship to the [forum] makes the exercise of such jurisdiction unreasonable.’” The Second Circuit has noted that “this is a principle that must be applied with caution, particularly in an international context.” To establish minimum contacts jurisdiction, “[t]he person sought to be charged must know, or have good reason to know, that his conduct will have effects in the [forum] seeking to assert jurisdiction over him.” This is to ensure “that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of the unilateral activity of another party or a third person.” “In determining whether personal jurisdiction exists over a foreign defendant who ... has been served under a federal service of process provision, a court should consider the defendant’s contacts throughout the United States and not just those contacts with the forum.” In addition to meeting the minimum contacts test, any exercise of personal jurisdiction must also be reasonable. This requires analysis of (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiffs interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies. “Where a plaintiff makes the threshold showing of the minimum contacts required by the first test, a defendant must present ‘a compelling case that the presence of some other considerations would render jurisdiction unreasonable.’ ” B. Motion to Dismiss When deciding a motion to dismiss under Rule 12(b)(6), the court must “accept as true all of the factual allegations contained in the complaint” and “draw all inferences in the light most favorable to the non-moving party[].” Nevertheless, the court need not accord “[ljegal conclusions, deductions or opinions couched as factual allegations ... a presumption of truthfulness.” In deciding a motion to dismiss, the court is not limited to the face of the complaint. The court “may [also] consider any written instrument attached to the complaint, statements or documents incorporated into the complaint by reference, legally required public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing the suit.” 1. Pleading Standard “Federal Rule of Civil Procedure 8(a)(2) requires ... ‘a short and plain statement of the claim showing that the pleader is entitled to relief.’ ” To survive a 12(b)(6) motion to dismiss, the allegations in the complaint must meet the standard of “plausibility.” Although the complaint need not provide “detailed factual allegations,” it must “amplify a claim with some factual allegations ... to render the claim plausible.” The standard is no longer that a complaint can be dismissed only if there us “no set of facts” that plaintiff could prove “which would entitle him to relief.” Rather, the complaint must provide “the grounds upon which [the plaintiffs] claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.’ ” However, allegations of fraud are subject to heightened pleading requirements. Rule 9(b) requires that “the circumstances constituting fraud ... be stated with particularity.” “This pleading constraint serves to provide a defendant with fair notice of a plaintiffs claim, safeguard his reputation from improvident charges of wrongdoing, and protect him against strike suits.” To comply with the requirements of Rule 9(b), a plaintiff alleging manipulation must “plead with particularity the nature, purpose, and effect of the fraudulent conduct and the roles of the defendants.” “Allegations that are eonclusory or unsupported by factual assertions are insufficient.” 2. Pleading Scienter Scienter, in relation to commodities fraud, is “the intent to deceive, manipulate, or defraud.” Rule 9(b) imposes a significant burden on allegations of scien-ter. Scienter can be pled by “alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness.” “Where motive is not apparent, it is still possible to plead scien-ter by identifying circumstances indicating conscious behavior by the defendant, though the strength of the circumstantial allegations must be correspondingly greater.” Under this theory of scienter, a plaintiff must allege facts showing that the defendant’s conduct is “ ‘at the least, conduct which is highly unreasonable and which represents an extreme departure from the standards of ordinary care to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it.’ ” Thus, an express allegation of deliberate misconduct can be sufficient to plead scien-ter. “The inquiry ... is whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard.” “To prove liability against a corporation ... a plaintiff must prove that an agent of the corporation committed a culpable act with the requisite scienter, and that the act (and accompanying mental state) are attributable to the corporation.” In Tellabs, Inc. v. Makor Issues & Rights, Ltd., the Supreme Court determined that to plead a “strong inference of scienter” in the context of the Private Securities Litigation Reform Act (“PSLRA”), a complaint must allege facts that give rise to an inference of scienter at least as strong as any competing inference. The Circuit has not yet clarified whether district courts must now find that the inference of scienter raised in actions governed by Rule 9(b) but not the PSLRA be at least as compelling as any other inference. C. CEA Violations 1. Manipulation “The elements of a market manipulation claim under section 9(a) of the CEA are as follows: (1) the defendant possessed an ability to influence market prices; (2) an artificial price existed; (3) the defendant caused the artificial price; and (4) the defendant specifically intended to cause the artificial price.” The specific intent to cause a market distortion, scienter, can be pled by “alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness.” “Sufficient motive allegations entail concrete benefits that could be realized by one or more of the false statements and wrongful nondisclosures alleged.” “[AJdmissions of misrepresentations, coupled with defendants’ continuous intimate knowledge of company affairs is enough to adequately infer scienter.” Moreover, “[m]otives that are generally possessed by most corporate directors and officers do not suffice; instead, plaintiffs must assert a concrete and personal benefit to the individual defendants resulting from the fraud.” “Where motive is not apparent, it is still possible to plead scienter by identifying circumstances indicating conscious behavior by the defendant, though the strength of the circumstantial allegations must be correspondingly greater.” Under this theory of scienter, a plaintiff must show that the defendant’s conduct is “at the least, conduct which is highly unreasonable and which represents an extreme departure from the standards of ordinary care to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it.” “Under certain circumstances, [courts] have found allegations of recklessness to be sufficient where plaintiffs alleged facts demonstrating that defendants failed to review or check information that they had a duty to monitor, or ignored obvious signs of fraud.” Recklessness can be shown by “defendants’ knowledge of facts or access to information contradicting their public statements. Under such circumstances, defendants knew or, more importantly, should have known that they were misrepresenting material facts related to the corporation.” 2.Private Right of Action The CEA provides that “[a]ny person ... who violates this chapter or who willfully aids, abets, counsels, induces, or procures the commission of a violation of this chapter shall be liable for actual damages” that result from certain transactions, in-eluding if the violator was counterparty to the plaintiff in a futures transaction or if the violation consisted of market manipulation and the plaintiff purchased or sold a futures contract. With certain limited exceptions that do not apply here, no other remedies are available under the CEA. 3. Aiding and Abetting Liability Section 22(a) (1) of the CEA creates liability for “[a]ny person ... who willfully aids, abets, counsels, induces, or procures the commission of a violation of this chapter....” “Generally stated, to recover on an aiding and abetting claim under the CEA, a plaintiff must prove that the defendant (1) had knowledge of the principal’s intent to violate the CEA; (2) intended to further that violation; and (3) committed some act in furtherance of the principal’s objective.” 4. Agency Liability The CEA also creates liability for an individual or corporate entity for “[t]he act, omission, or failure of any official, agent, or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office ...,” “Courts have described subsection 2(a)(1)(B) as codifying ‘a variant of the common law principle of respondeat superior’ and thus mak[ing] an employer strictly liable — that is to say, regardless of the presence or absence of fault on the employer’s part — for torts committed by his employees in the furtherance of his business.’ ” Alleging a principal-agent relationship requires allegations of “(1) the principal’s manifestation of intent to grant authority to the agent, and (2) agreement by the agent.” “In addition, the principal must maintain control over key aspects of the undertaking.” D. Unjust Enrichment “The basic elements of an unjust enrichment claim in New York [are] that (1) defendant was enriched, (2) at plaintiffs expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.” In addition, to state a claim for unjust enrichment, there must be some relationship between the parties, though it need not be as close as privity of contract. E. Piercing the Corporate Veil “In some instances, the corporate relationship between a parent and its subsidiary [is] sufficiently close as to justify piercing the corporate veil and holding one corporation legally accountable for the actions of the other.” Courts pierce the corporate veil “to prevent fraud or other wrong, or where a parent dominates and controls a subsidiary.” Veil piercing determinations are fact-specific and are highly sensitive to “the circumstances of each case.” “[A] parent corporation and its subsidiary lose their distinct corporate identities when their conduct demonstrates a virtual abandonment of separateness.” Factors that are relevant to determining whether a corporation’s form should be respected include: “(1) disregard of corporate formalities; (2) inadequate capitalization; (3) intermingling of fluids; (4) overlap in ownership, officers, directors, and personnel; (5) common office space, address and telephone numbers of corporate entities; (6) the degree of discretion shown by the allegedly dominated corporation; (7) whether the dealings between the entities are at arms length; (8) whether the corporations are treated as independent profit centers; (9) payment or guarantee of the corporation’s debts by the dominating entity, and (10) intermingling of property between the entities.” IV. DISCUSSION A. What Is Manipulation? A fundamental disagreement between the parties is the extent to which certain conduct can constitute manipulation. Defendants argue that the simple purchase and sale of futures contracts, even in large quantities, cannot constitute market manipulation. Plaintiffs disagree. In ATSI Communications, Inc. v. Shaar Fund, Ltd., the Second Circuit explained that “short selling [of securities] — even in high volumes — is not, by itself, manipulative .... To be actionable as a manipulative act, short selling must be willfully combined with something more to create a false impression of how market participants value a security.” The Circuit explained that short selling, far from being inherently manipulative, is important to the proper functioning of the market, providing liquidity and moving prices towards their intrinsic values. Defendants contend that this language indicates that legitimate transactions cannot violate the CEA notwithstanding the intent of the traders. Whether ATSI’s conclusion should be extended to commodities trading depends on the underlying rationale for that conclusion. Discussing securities, ATSI determined that “manipulation ‘connotes intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.’ ” Specifically, the deception “arises from the fact that investors are misled to believe ‘that prices at which they purchase and sell securities are determined by the natural interplay of supply and demand, not rigged by manipulators.’ ” Manipulation may deceive investors by suggesting that the market has discovered new information that is affecting the price of the securities. This logic applies equally to the commodities markets. Just as with securities, commodities manipulation deceives traders as to the market’s true judgment of the worth of the commodities. Similarly, for the same reasons that ATSI concluded that short selling, without more, cannot constitute securities manipulation, entering into futures contracts or swaps, without more, cannot constitute commodities manipulation. If a trading pattern is supported by a legitimate economic rationale, it cannot be the basis for liability under the CEA because it does not send a false signal. There must be “something more,” some additional factor that causes the dissemination of false or misleading information. But the additional factor need not be a misstatement or omission. The “something more” is anything that distinguishes a transaction made for legitimate economic purposes from an attempted manipulation. Because every transaction signals that the buyer and seller have legitimate economic motives for the transaction, if either party lacks that motivation, the signal is inaccurate. Thus, a legitimate transaction combined with an improper motive is commodities manipulation. Permitting intent to be the “something more” causes difficulty in distinguishing between legitimate trading strategies and deliberate attempts at market manipulation. In close cases, there should be no liability. The laws that forbid market manipulation should not encroach on legitimate economic decisions lest they discourage the very activity that underlies the integrity of the markets they seek to protect. Because as discussed below, Rule 9(b) applies to such allegations, plaintiffs face a substantial hurdle in alleging that a legitimate transaction plus scienter constitutes commodities fraud. There are two types of transactions alleged here: Amaranth’s manipulation by buying and holding large positions and by selling large quantities of futures during the settlement period. Under the principles explained above, the former transactions—the mere acts of buying and holding large positions—are not manipulation unless plaintiffs have alleged facts that give rise to a strong inference of scienter. If they have done so, the combination of wrongful intent (or, more accurately, the lack of a legitimate economic motive) and a legitimate transaction would constitute manipulation. As to the latter transactions, the timing of the sales are suspicious in themselves. While the sale of a large number of futures is not inherently manipulative, allegations that a defendant repeatedly sold large numbers of futures just before the close of settlement periods are sufficient to allege commodities manipulation. B. Applicable Pleading Standard The parties disagree over whether Rule 8(a) or Rule 9(b) applies. In ATSI, the Second Circuit explained that “a claim for market manipulation is a claim for fraud, [so] it must be pled with particularity under Rule 9(b).” Plaintiffs argue that this does not apply because ATSI dealt with securities, not commodities. However, there is no principled reason to distinguish between commodities manipulation and securities manipulation in selecting the applicable pleading standard. As discussed above, market manipulation is inherently deceptive. Thus, a complaint that alleges manipulation of commodities prices must satisfy Rule 9(b)’s requirement that “the circumstances constituting fraud ... be stated with particularity.” As ATSI noted, however, “[a] claim of manipulation ... can involve facts solely within the defendant’s knowledge; therefore, at the early stages of litigation, the plaintiff need not plead manipulation to the same degree of specificity as a plain misrepresentation claim.” “This test will be satisfied if the complaint sets forth, to the extent possible, what manipulative acts were performed, which defendants performed them, when the manipulative acts were performed, and what effect the scheme had on the market for the securities at issue.” Further, as discussed above, an otherwise legitimate trade can violate the CEA if performed with scienter. But Rule 9(b) serves as a gatekeeper, requiring a plaintiff to do more than merely allege that a transaction that appears legitimate was intended to manipulate the market. Under Rule 9(b), the factual allegations in the complaint must give rise to a “strong inference” of scienter. As the Supreme Court explained, “[t]he strength of an inference cannot be decided in a vacuum.” The inference must be “at least as compelling as any opposing inference one could draw from the facts alleged.” Thus, applying this reasoning to the Rule 9(b) standard, a claim for manipulation that alleges that a defendant engaged in an otherwise legitimate transaction with the goal of manipulating the market must be dismissed unless the facts alleged, taken as true, give rise to a strong inference that manipulation was the dominant purpose of the transaction. C. Personal Jurisdiction 1. Brian Hunter Hunter argues that the Court lacks personal jurisdiction over him because he does not have the requisite minimum contacts with the forum. I disagree. Hunter’s alleged transactions presented unmistakably foreseeable effects within the United States. For example, on April 26, 2006, Hunter allegedly placed an order to sell five hundred May 2006 natural gas futures with instructions to hold execution of the order until the last eight minutes of the settlement period in order to manipulate the price of those contracts. On a different occasion, Hunter allegedly instructed another defendant to “smash” the settlement price of the March 2006 natural gas futures contract. These trades constitute purposeful availment of the United States, and if the allegations are correct, Hunter knew that his trades would affect the price of natural gas futures within the United States. This forum has a substantial interest in ensuring that American citizens receive any relief to which they are entitled as a result of Hunter’s alleged violations of American law. Moreover, the Court’s exercise of jurisdiction over Hunter is entirely reasonable. Exercising jurisdiction over Hunter will impose a minimal burden given his business contacts with the United States. The United States has a substantial interest in the enforcement of its commodities laws, and plaintiffs have a similarly substantial interest in obtaining relief for Hunter’s alleged violation of those laws. Social policies and the interest in efficient dispute resolution further favor the exercise of jurisdiction. Thus, this Court will exercise personal jurisdiction over Hunter. 2. Amaranth International Amaranth International, however, lacks the requisite minimum contacts with the United States to support personal jurisdiction. There is no indication that Amaranth International purposefully availed itself of this forum. The only connection between Amaranth International and the forum is that the company invested in a foreign hedge fund located in the Cayman Islands but managed by plaintiffs. Defendant never allegedly directed any activity toward the United States. Within the United States, the defendant has never commenced any suit, registered an office, been qualified or licensed to do business, paid or been required to pay taxes, employed any officers or agents, leased or purchased any property, acquired a telephone number, or engaged in any other activity reasonably expected of a business venture under the protection and permission of domestic laws. Further, the Supreme Court has emphasized that the actions of a third party connected to defendant and the forum will not render the defendant subject to jurisdiction if the standard of purposeful availment is not met. Thus, the Court’s exercise of personal jurisdiction over other Amaranth defendants does not justify a finding of personal jurisdiction over Amaranth International. As such, all claims against Amaranth International are dismissed for want of personal jurisdiction. A plaintiff must allege facts that would permit the exercise of personal jurisdiction in order to warrant jurisdictional discovery. Here, plaintiff has failed to allege facts that, if true, would permit the exercise of jurisdiction over Amaranth International. As such, jurisdictional discovery is denied. D. Private Right of Action as to Settlement Prices Section 22(a) of the CEA provides a private right of action only in limited circumstances. As discussed above, buyers and sellers of commodities can sue a trader who was not their counterparty only under section 22(a)(1)(D), which requires that the violation of the CEA “constitute[ ] a manipulation of the price of any such contract or the price of the commodity underlying such contract.” Defendants argue that the manipulation of settlement prices is not the manipulation of the price of any contract that plaintiffs bought or sold. A related question arose in Vitanza v. Board of Trade of the City of New York. At issue were the daily settlement prices for a certain option, which were calculated pursuant to a formula. Plaintiffs alleged that the committee charged with this calculation “grossly miscalculated” those prices, leading to inaccurate margin calculations. One defendant argued that section 22(a)(1)(D) did not provide a cause of action for manipulation of settlement prices. The court agreed: the settlement price is not the value of the contract itself or the value of the commodity underlying the contract. In their papers, Plaintiffs argue that settlement prices are an essential element in the operation of a commodities market and their manipulation is just as corrupting to the integrity of the market as an attempt to manipulate contract prices. While Plaintiffs claims may be true, courts are extremely reluctant to imply a private right of action where the statute explicitly provides a different remedy. As a result, the court dismissed the claims that relied on this theory. Although defendants assert that the situation here is indistinguishable, the Complaint alleges not only that defendants manipulated settlement prices, but also that that manipulation altered the prices of NYMEX natural gas futures. Vitanza involved the unusual circumstance where the defendants were alleged to have manipulated only the calculation of settlement prices, not the prices of the underlying contracts. The plaintiffs in that case argued that “as a result of the inaccurate settlement prices, the margin calculations for their accounts were incorrect, which prevented Plaintiffs from effectively trading their accounts.” Here, defendants’ manipulations allegedly altered not only settlement prices, but also the prices of futures contracts. Thus, plaintiffs allege that they were harmed through the manipulation of the futures contract prices, not simply by the altering of settlement prices. Therefore, the allegations fall squarely within the scope of section 22(a)(1)(D). E. Violation of the CEA 1. Common Enterprise Liability and the Corporate Veil As discussed above, to state a claim for primary manipulation under the CEA, plaintiffs must allege that the defendant manipulated a price. Most of the Amaranth defendants are not alleged to have taken any manipulative actions. Thus, plaintiffs have failed to state a claim for primary violations of the CEA against AGI, AMLP, the Feeder Funds, and the Master Fund. Plaintiffs allege that the Amaranth entities “are all liable as a common enterprise for one another’s acts.” They argue that the entities shared a common address, were subject to the “de jure and de facto control” of one individual (Maounis), and functioned as a single entity commodity pool. However, plaintiffs have failed to allege sufficient facts to support piercing the corporate veil. There are no allegations of the disregard of corporate formalities, inadequate capitalization, intermingling of funds or property, reduced discretion by any entity, failure to deal at arms’ length, or payment of the debts of one entity by another. While plaintiffs have alleged common ownership and overlapping directors, these factors alone are insufficient to support an extension of liability. Plaintiffs assert that “[w]here one or more corporate entities operate in a common enterprise, each may be held liable for the manipulative acts and practices of the other.... Common enterprises may be held to exist where common control exists, business is transacted through a maze of interrelated companies, or the entities commingle funds.” Even assuming that a private plaintiff could make use of the common enterprise doctrine, and plaintiffs have cited no case on this point, plañí-tiffs have failed to plead commingling of funds or any shared use of resources that would permit the application of the doctrine. Because there is no basis for finding that the corporate forms of the Amaranth entities should be disregarded, plaintiffs have failed to state a claim for primary violation of the CEA except against those defendants that are alleged to have directly manipulated the commodities market. Thus, all primary claims against AGI, AMLP, the Feeder Funds, and the Master Fund are dismissed. 2. Scienter As discussed above, to state a claim for commodities manipulation or for aiding and abetting manipulation, the Complaint must allege facts that give rise to an inference of scienter that is at least as strong as any competing inference that can be drawn from those facts. The allegations as to each manipulative act are discussed separately. a. Acquisition of a Large Position The Complaint alleges that “Amaranth engaged in the classic manipulative act of buying and leaving open increasingly large positions which, due to their extraordinary but increasing size, caused prices to move in their favor.” As discussed above, taking a position is a legitimate transaction unless there is some additional factor that converts the transaction into manipulation. In this case, the Complaint alleges that Amaranth took these positions knowing that they would artificially inflate market prices. But although the Complaint contains a detailed description of the many trades in which Amaranth acquired, a substantial position in natural gas futures, it fails to allege facts that give rise to a strong inference that Amaranth intended to manipulate the market through these transactions. Plaintiffs allege that Amaranth “well knew” that the acquisition of a large position would send an artificial signal to the market. But entering into a legitimate transaction knowing that it will distort the market is not manipulation- — only intent, not knowledge, can transform a legitimate transaction into manipulation. Allegations of this type are exactly those that Rule 9(b) seeks to prevent. Trading, in and of itself, does not constitute market manipulation. Further, the details of the trade do not give rise to a strong inference of scienter on behalf of any defendant. Without such an inference, there is nothing to distinguish these transactions from legitimate trading. Therefore, all claims related to these transactions are dismissed. Similarly, plaintiffs’ allegations that Amaranth caused artificial price changes through “massive short-term trading” are well-documented, but are not supported by factual allegations that give rise to a strong inference of scienter. All claims related to these trades are dismissed as well. b. Manipulation of Settlement Prices Plaintiffs have clearly pled manipulative acts with respect to their allegations of manipulation of settlement prices. While large transactions are not inherently manipulative, the alleged timing of the transactions provides the “something more” that is required to convert a legitimate transaction into market manipulation. But plaintiffs must still plead facts that give rise to a strong inference of scienter. The factual allegations that plaintiffs contend support an inference of scienter are discussed separately for each group of defendants. i. Hunter and Donohoe The day prior to the expiration of the March 2006 futures, Hunter allegedly told Donohoe to “ ‘make sure we have lots of futures to sell MoC [market on close] tomorrow.’ ” Hunter instructed Donohoe to purchase more futures so that they could be sold the next day. The next day, Donohoe asked Hunter if 3,111 contracts would be sufficient; Hunter responded that it would. Hunter then told another Amaranth trader that he would “ ‘just need [the March 2006 contract price] to get smashed on settle then day is done.’ ” Half an hour before the settlement period began for the March 2006 contracts, Hunter allegedly told another trader that he was selling 4,000 contracts “ ‘MoC.’ ” The trader responded, “ ‘unless you are huge bearish position why the f would yo do that’ ” [sic]. Hunter explained: “ ‘all from options yesterday / so we 11 see what the floor has / bit of an expiriment mainly’ ” [sic]. During the thirty minute settlement period, Donohoe instructed ALX to place six sales orders that comprised Amaranth’s entire March 2006 futures holding. After some of the trades were complete, the trader with whom Hunter had previously corresponded asked Hunter if he had finished. Hunter responded, “ ‘no / have a lot more to sell / waiting until 2:20/’ ” ten minutes before the close of the settlement period. Amidst the settlement period, Hunter allegedly told Donohoe that “ ‘today came together quite nicely,’ ” and Do-nohoe replied, “ ‘h [March contract] will settle lower / and h/j wider / nice’ ” [sic]. Although the Complaint alleges attempts by Donohoe and Hunter to manipulate settlement prices for two other contracts, there is no need to discuss them here. The allegations as to the March futures alone are sufficient to raise a strong inference of scienter. The timing of the orders, the conduct of the traders, and Amaranth’s ICE swap holdings strongly suggest an improper motive. Therefore, the motions of these defendants to dismiss the claims for failure to plead scienter are denied. ii. Maounis Maounis argues that the Complaint fails to raise a strong inference that he intended to manipulate the commodities market or aid any other person in doing so. Plaintiffs allege that the manipulation was partly the result of “trading decisions” of Maounis. However, they allege no facts that would support an inference that he acted with scienter; the Complaint does not even allege facts that suggest that he was connected with any particular trade. Therefore, the primary claims against Maounis are dismissed. iii. The Other Amaranth Entities As discussed above, to plead that a corporation acted with scienter, “the pleaded facts must create a strong inference that someone whose intent could be imputed to the corporation acted with the requisite scienter.” The Complaint alleges scienter only as to Hunter and Dono-hoe. Hunter and Donohoe are alleged to have been employed by Amaranth Advis-ors. Therefore, the primary claims against all Amaranth entities except Amaranth Advisors are dismissed. 3. Aiding and Abetting Liability As discussed above, to state a claim for aiding and abetting a violation of the CEA, plaintiffs must allege that a defendant, knowing of a principal’s intent to manipulate the market and intending to further that manipulation, performed an act in furtherance of the manipulation. These elements are discussed separately. a. Knowledge of and Intent to Further the Manipulation i. DeLucia and ALX Amaranth was allegedly not only one of the largest natural gas traders but also ALX’s largest customer.-' Amaranth’s trades “generated substantial revenue” for ALX in the form of commissions. One of ALX’s employees, Vincent Rufa, a telephone clerk, socialized with Amaranth personnel. Just before the manipulation of the March futures, Hunter told Donohoe that he planned to inform “vinnie,” presumably Rufa, of the manipulation. During the settlement period for March futures, DeLucia allegedly “traded on Amaranth’s behalf.” Similarly, on March 29, 2006, the settlement day for April futures, Amaranth sold 303 April futures between 12:41 p.m. and 1:50 p.m. Between 2:00 p.m. and 2:03 p.m., Amaranth instructed ALX to sell 1,303 futures “MOC.” DeLucia was again the selling broker. On April 26, 2006, the settlement day for May 2006 futures, eight minutes before the close of the settlement period, Amaranth instructed ALX to sell 2,000 futures. The order was so large and was placed so late that ALX was not able to execute the entire order before the expiration of the settlement period. These facts raise a strong inference that DeLucia (and thus ALX) knew of and intended to aid the manipulation. The Complaint alleges that Amaranth engaged in a highly suspicious trading pattern that had the effect of driving down the settlement price for natural gas futures. Had Amaranth only followed this pattern once, no inference of scienter could be drawn. Presumably floor brokers receive orders in quick succession and execute those orders as rapidly as possible, taking little time to consider the meaning behind those orders. Perhaps only in retrospect, after the settlement period for the March 2006 futures, did the full effects of Amaranth’s trading become apparent. Floor brokers are not expected to weigh the implications of every order they receive. Nonetheless, accepting plaintiffs’ factual allegations as true, the March 2006 orders must have been suspicious to DeLucia. In a market where several hundred contracts is a sizeable holding, Amaranth sold 3, 111 contracts in a single day. In retrospect, it is reasonable to infer that DeLu-cia may have suspected that manipulation was occurring. It is further reasonable to infer that DeLucia may have become more suspicious when the next month Amaranth contacted DeLucia and instructed him to sell 1,600 futures contracts on the settlement day, 1,300 of which were to be sold within the settlement period. By the third settlement period, when ALX was instructed to sell 2,000 futures within the last eight minutes of the settlement period, the strongest inference is that DeLucia proceeded despite the knowledge that he was aiding Amaranth’s market manipulation. Indeed, “ ‘a floor broker is responsible for evaluating the orders he receives for indications that his participation in the transaction is legally prohibited.’ ” When such indications are as strong as they are alleged to have been here, the floor broker cannot plead ignorance. Thus, plaintiffs have adequately alleged that DeLucia intended to assist Amaranth’s manipulation. ii. TFS Energy and Gotham The Complaint contains minimal specific factual allegations as to TFS Energy or Gotham. Instead, these defendants and ALX are lumped together as the “Floor Broker Defendants,” and plaintiffs raise various generalized allegations against them. These allegations are plainly insufficient to state a claim under Rule 9(b). There is virtually nothing to support any inference of intent to further the manipulation on behalf of TFS Energy or Gotham. Therefore, all claims against these defendants are dismissed. iii. Maounis The Complaint alleges that Maounis “had de jure and de facto control” of the Amaranth entities and that they acted at his direction. It further alleges that he “willfully aided, abetted, counseled, induced, or procured the commission of violations” of the CEA by the Amaranth entities. Disregarding plaintiffs’ conclusory language, their strongest argument is that Maounis, as CEO of the Amaranth entities, must have known about these transactions. Plaintiffs have alleged that Amaranth controlled a majority of the national market for natural gas futures, having taken positions whose size was unprecedented, and earned large sums of money from those positions. Further, those positions allegedly led to the collapse of the Amaranth entities when the price of natural gas collapsed. It is reasonable to infer from these facts that Maounis knew of the positions. But as discussed above, plaintiffs have failed to state a claim for market manipulation based only on Amaranth’s holding large positions. Plaintiffs have pled manipulation under the CEA only as to their claims that relate to Amaranth’s alleged manipulation of settlement prices. The facts alleged in the Complaint support a strong inference of Maounis’s knowledge and scienter as to the settlement price manipulation. As with ALX, had the alleged manipulation occurred only once, it would be reasonable to conclude that Maounis may have been unaware of the “expiriment.” But after two repetitions, when Amaranth had allegedly earned tens of millions of dollars through these trades, it strains credulity to suggest that Maounis was unaware of the manipulation. On the contrary, the Complaint adequately alleges that Maounis knew of the manipulation and intended its success. iv. The J.P. Morgan Defendants The Complaint alleges that JPMFI became one of Amaranth’s futures commission merchants in 2003 and became its primary clearing broker for natural gas in 2005. In accordance with industry practice, JPMFI recalculated Amaranth’s margin requirements each day. This calculation involved analysis of Amaranth’s trading positions. By early 2006, JPMFI was the only futures commission merchant used by Amaranth. Thus, JPMFI had access to information on virtually all of Amaranth’s trades. From this information, JPMFI knew that Amaranth was violating NYMEX position limits. On May 24, 2006, a JPMFI employee emailed several individuals at Amaranth, including Hunter and Donohoe, to inform them that Amaranth had violated these limits. In the summer of 2006, Amaranth requested several ICE credit limit increases from JPMFI. On August 15, 2006, an employee at Amaranth told an employee at “JPM” that Amaranth was “ ‘taking down risk in the energy book by trading OTC and clearing these trades via ICE and NYMEX ClearPort so as to keep their activity out of view of the floor/broker mkt.’ ” These allegations are sufficient to permit a strong inference that JPMFI had knowledge of the manipulations and intended their success. However, because there are no allegations that would support an inference of scienter as to the other JPM entities, plaintiffs’ aiding and abetting claims against those defendants are dismissed. b. Act in Furtherance i. ALX and DeLucia ALX and DeLucia move to dismiss on the ground that they are not alleged to have exercised any independent judgment or have provided any advisory services to the Amaranth entities, but only ful