Amaranth's Risky Business

Gambling with borrowed money may not have been the only risky thing Amaranth was doing. There's speculation on Wall Street that the hedge fund, led by Nick Mauonis, may have been trying to corner the market in long contracts on natural gas futures.

Michael Greenberger, a professor at the University of Maryland Law School and former director of the division of trading and markets at the Commodity Futures Trading Commission, says he's heard that Amaranth made many of its trades on the over-the-counter market -- away from the New York Mercantile Exchange, where trades could have been monitored by regulators. Greenberger says the natural gas market has become a pure speculators' market subject to potential manipulation.

He says he wouldn't be surprised if the Amaranth debacle spurs a closer look into the high-risk, speculative trading going in the natural gas market.

"I don't know if Amaranth is going to be the last straw," says Greenberger. "But Amaranth is not going to be the last problem."

Indeed, there's speculation that Amaranth's big move into long contracts on natural gas hastened the demise of MotherRock, a $450 million hedge fund that went bust in July after being overly short on natural gas prices.

Traders say Amaranth's big bet on gas prices going up may have squeezed MotherRock, which was betting on a sharp decline.