On June 14, 2024, Clark Smith Villazor LLP, initiated a lawsuit in the District Court for the Southern District of New York against CME Group Inc. (CMEG) and New York Mercantile Exchange, Inc. (NYMEX) on behalf of its clients, three investment funds which had held significant open interests in the Global Emissions Offset Futures Contract (the “GEO Futures Contract”) launched by CMEG and NYMEX in 2021 which provided for delivery of physical carbon offset credits. The lawsuit brings claims against NYMEX for violation of the Commodity Exchange Act and breach of contract, and against CMEG for promissory estoppel and tortious interference with contractual relations.
As further described in the complaint, CMEG and NYMEX failed to enforce the NYMEX Rulebook with respect to the GEO Futures Contract by irrationally and arbitrarily interpreting the relevant rule in a way that altered a fundamental requirement of the GEO Futures Contract requiring that the carbon offset credits used to settle the contract meet CORSIA eligibility requirements at the time of delivery. CMEG and NYMEX adopted and announced this irrational, arbitrary, and incorrect interpretation of the NYMEX Rulebook in order to benefit certain larger, more profitable financial institutions customers and ultimately increase the fees it received from such customers. The three investment funds seek recovery of damages and lost profits totaling over $155 million.
A copy of the complaint is available here. Additional coverage of the lawsuit can be found in Bloomberg Law, Quantum Commodity Intelligence, and Carbon Pulse.
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