Mystery Trader’s Debt-Ceiling Windfall Sparks Insider Concerns
A Wall Street trader made a $7.5 million windfall on a suspiciously-timed investment ahead of a surprise debt limit deal concession
Debt-ceiling deal wildly profitable for mystery trader, raising suspicions of insider trading
* Bullish options bet on Equitrans came days before debt deal
* Firm involved in building a pipeline that was included in deal
* A debt ceiling deal surprisingly green-lit the Mountain Valley Pipeline.
* A trader bought 100,000 call options on the pipeline's owner days before that was announced.
The US government’s move to greenlight a 300-mile natural gas pipeline as part of legislation to stave off a Treasury default shocked just about everyone, except for a mystery trader who somehow appears to have seen it coming.
As part of the debt ceiling deal, one surprise concession that made it into the bill was the approval of the Mountain Valley Pipeline, a 304-mile natural gas connection from northwest West Virginia to southern Virginia.
On May 24 — several days before an agreement was announced — a huge bullish bet was made on Equitrans Midstream Corp., data compiled by Bloomberg show. The company is deeply involved in the long-delayed Mountain Valley Pipeline. The wager involved snapping up 100,000 call options on the firm’s stock.
It proved prescient and wildly profitable within just a few days.
On May 27, White House and Republican lawmakers reached a deal that would give the long-delayed Mountain Valley Pipeline the final approvals needed to complete the project.
Throughout April and much of May, negotiators from the White House and Congress went back and forth on broad-stroke parameters of an agreement. Almost until the very end, the details were closely held and in flux. Doubts lingered over whether a deal would be reached before the US was scheduled to run out of money in early June.
A pet project of West Virginia Sen. Joe Manchin that had been mired in Congress, the law forces action on permits that should push the project forward.
However, there was no public reason to believe that the pipeline was in the deal at all, which makes the actions of one mystery trader -- who made a killing on its inclusion -- somewhat suspicious, according to a Bloomberg analysis of trading data.
Shares in Equitrans Midstream Corporation were down 35% last year. On May 24, a few days before an agreement was struck, a mystery trader bought 100,000 call options -- essentially bets on a stock-price increase -- on Equitrans Midstream. Then, on May 27, the debt deal including the Mountain Valley Pipeline was struck.
Following that announcement, Equitrans Midstream shares jumped 49%.
From the looks of it, the bet earned the trader $7.5 million as of last Friday, according to Bloomberg. The options are still outstanding, so that number could grow in the event that Equitrans Midstream continues to rally.
That kind of perfect timing is, needless to say, fishy. The deal on Mountain Valley was kept secret up until the debt deal was announced. Some are suspicious enough they want it investigated for potential insider trading.
Equitrans said neither they nor any executives were involved in the transactions. Manchin himself said he knew nothing about the options trade. The negotiations were played very close to the vest between House Speaker Kevin McCarthy and the White House. Ethics watchdogs want answers, according to Bloomberg.
Members of Congress are barred from trading on confidential information, though a 2021 Insider investigation found repeated violations of the STOCK Act among members.