Freepoint Commodities: A Consultant Paid by the Barrel

Freepoint Commodities agreed to more than $91 million in civil penalties and repayment of gains to settle Commodity Futures Trading Commission charges over corrupt payments for confidential oil information. The alleged advantage reached right into the other side’s business: shipping plans, competing bids and negotiating strategy. For someone who reviewed consultant payments or worked on the oil desk, the question is what those fees bought and which trades followed.

The commission’s December 14, 2023 order describes conduct from around June 2012 through November 2018. Freepoint, a commodities merchant based in Stamford, Connecticut, traded physical and derivative oil products across major trading hubs. The commission alleged that Connecticut traders obtained information from employees of a South American state-owned enterprise who owed their employer a duty to keep it confidential.

Corrupt Oil Information: Shipping Plans and Competing Bids

The information in Freepoint Commodities’ alleged scheme showed traders what oil was coming, what competitors offered and how the seller intended to negotiate. The order describes advance notice of shipments, including the quality and quantity of fuel oil, alongside competing cargo bids and the enterprise’s commercial plans. This is the information advantage at the center of corrupt commodity tenders: a trader gets to see decisions the other participants expect to remain private.

Oil trading depends on those physical details. As the commission’s order explains, products move among producers, refiners, shipping and storage facilities, and consumers, with different products and blends serving different uses. Market participants use futures, options and swaps to manage the price exposure that comes with physical oil. Knowing a cargo’s specification and arrival before competing buyers can therefore inform both the purchase and the trading decisions around it.

According to the order, Freepoint traders used the information in physical transactions with the enterprise, including fuel-oil purchases for U.S. delivery. Freepoint also hedged some purchases on U.S. futures exchanges. The commission treated that use of secretly bought information in physical oil trades as fraud under the Commodity Exchange Act.

Consulting Fees That Followed the Barrels

The commission alleged that Freepoint paid a consultant who used part of his fees to bribe employees of the state-owned enterprise. The employees passed confidential information through him to U.S.-based traders. The consultant received a per-barrel fee on transactions completed using the information he supplied.

That payment structure gives a payment reviewer something concrete to recognize. A consultant’s invoice and the barrels purchased belong in the same account of the transaction, alongside the information that reached the desk. The relevant question is what the consultant delivered to earn the fee, and who inside the business understood its source.

The agreements themselves add a sharp detail. According to the order, the consultant’s bribes violated the express terms of his consulting agreements with Freepoint, while members of the oil trading group knew they were using misappropriated information. A contract’s written restrictions and the desk’s knowledge can tell very different stories. We want to understand both.

The Global Integrity Anti-Corruption Evidence program’s 2022 report, Merchants of Integrity? Commodity Trading and Corruption Research for a World in Transition, describes commodity trading as a business of high volumes, low margins and overlapping intermediaries, where profits depend on the difference between purchase and sale prices. Its review identifies bribery used to secure purchases and repurchases along supply chains involving traders, private investors and government actors. Applied to Freepoint’s alleged per-barrel arrangement, that industry context explains why the fee schedule matters: the consultant’s compensation followed the volume traded using his information.

Bidding on Cargoes the Desk Did Not Want

The commission’s order describes an instruction to submit bids even when Freepoint did not want the oil. According to the agency, the purpose was to keep the state-owned enterprise from noticing which cargoes came with an informational advantage:

That instruction makes bids for unwanted cargoes part of the alleged concealment. A review focused entirely on profitable purchases could miss the reason the desk was told to bid on other cargoes. We would want the bid history beside the communications explaining which cargoes the traders actually wanted.

The alleged disguise also ran through the communications and payment channels. The order says traders and the consultant used code words, fictitious names, private email accounts and encrypted messaging applications, and used “breakfast” as a code word for bribes. It also describes consulting companies set up to receive both the money used for bribes and the consultant’s own fees. The consultant instructed traders to keep his name out of conversations with the enterprise’s personnel.

For an insider, the connection between those channels matters. A payment reviewer might recognize the consulting company while a trader recognizes the information it supplied. Putting those accounts together can explain a fee that the invoice description alone leaves obscure.

Who Could See the Arrangement

An oil trader and a payment reviewer could see different parts of the arrangement described in Freepoint’s order. Someone on the desk might recognize shipment specifications, competing bids or negotiating plans, while someone in accounts payable might recognize the consulting agreement, invoices and per-barrel fees.

Tender staff could know who had access to the original information and how it reached an outsider. Trading oversight could see the purchases, hedges and instructions to bid on cargoes the desk did not want. We work with insiders to connect what they know about the information, the payments and the trades it informed.

The Connection to Vitol’s Tender Case

Vitol‘s CFTC settlement also concerned alleged corrupt procurement of confidential information, alongside attempted manipulation of physical-oil benchmarks. The Vitol order described alleged bribes and kickbacks used to obtain pricing and tender advantages from state-owned-company employees in Brazil, Ecuador and Mexico.

The shared pattern is a payment that buys access to the counterparty’s information or decisions. Freepoint’s order makes the consultant’s compensation, confidential cargo information and concealment particularly concrete.

What the Freepoint CFTC Settlement Required

The Freepoint CFTC settlement required a $61 million civil monetary penalty and $30,551,150 in disgorgement, the repayment of gains associated with the violation. The order treated the gain repayment and the penalty as separate obligations, with credit for qualifying payments under the parallel Justice Department resolution. That distinction matters here because the alleged scheme earned money through the very transactions the consultant’s information helped the desk complete.

Freepoint also represented to the commission that it had strengthened third-party due diligence and approval processes, updated policies and enhanced trading surveillance. Those representations bring the case back to the same business records: who approved an intermediary, what the business paid for and how the information reached a trade. For someone reviewing comparable conduct, those are the connections worth discussing with us.

Whistleblower Rewards for Commodity-Market Information

The CFTC whistleblower program can pay eligible whistleblowers 10% to 30% of qualifying monetary sanctions collected. The commission described that opportunity in its Freepoint announcement. We work with you to assess how your knowledge of payments, information and trades could contribute to a commodity-fraud action.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If you are considering reporting what happened inside a commodity-trading business, our whistleblower experts help you identify the case your information supports and bring in CFTC whistleblower lawyers with the relevant trading experience.

You Know What the Consultant Delivered

If you saw confidential cargo information arrive alongside unexplained consultant fees, tell our whistleblower experts what the desk was buying. We work beside you to build your strongest commodity-fraud whistleblower case and connect you with CFTC whistleblower lawyers who understand physical oil trading and intermediary payments. Your knowledge of what those payments bought belongs at the center of that work.