(Bloomberg) — Glen Point Capital co-founder Neil Phillips was convicted of manipulating the foreign-exchange market to hit a “barrier” price and set off a $20 million possibility.
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The previous hedge fund govt was discovered responsible Wednesday of commodities fraud by a jury in federal courtroom in Manhattan. Prosecutors had accused Phillips of directing $725 million in trades on Dec. 26, 2017, to deliberately elevate the worth of the South African rand in opposition to the US greenback.
Phillips, 53, was discovered not responsible of a associated conspiracy cost. He faces a most of 10 years in jail on the fraud depend. US District Choose Lewis Liman scheduled his sentencing for March 14.
The protection had argued that his actions have been half of a longer-term technique and in addition fell inside normal trade practices related to barrier buying and selling. He contended that alleged sufferer Morgan Stanley, which offered Glen Point the choice for round $2 million, engaged in related trades to hedge its personal danger from the guess.
The decision is a serious win for Manhattan federal prosecutors as they put together for a much-larger market manipulation case early subsequent yr in opposition to Archegos Capital co-founder Invoice Hwang, who equally plans to argue that the banks he allegedly cheated knew what they have been doing.
Learn Extra: Glen Point Trial Casts Morgan Stanley as Hedge Fund’s Sufferer
Phillips didn’t visibly react as the decision was learn. Afterwards, in an uncommon transfer, he shook arms with the prosecutors and was then embraced by his personal attorneys.
The indictment of the high-flying London-based dealer, whose George Soros-backed fund was one of the largest launches in 2015, reverberated internationally’s monetary capitals when it was unsealed in September 2022. Phillips’s dramatic arrest in Ibiza on the request of US authorities led to the suspension of a number of of former staffers who’d joined different funds from Glen Point.
On the coronary heart of the prosecutors’ case was a one-hour shopping for binge of the South African forex within the early hours of December 26, 2017. The “Boxing Day trades” successfully moved the trade price to 12.50 rand in opposition to the greenback, the barrier at which the Morgan Stanley possibility would pay out. In line with the federal government, Phillips resorted to market manipulation as a result of the choice was set to run out on Jan. 2, 2018.
Jurors have been proven transcripts of Bloomberg chats wherein Phillips mentioned how “to interrupt 50” with the Singapore-based dealer at Nomura Holdings who positioned his orders. “My intention is to commerce through 50,” Phillips stated in a single message. “Get it through,” he stated in one other. Prosecutors additionally performed an earlier telephone dialog wherein Phillips advised one of his Glen Point merchants that he may want him “to start out f*cking round in greenback/rand tonight.”
The protection introduced proof that Phillips, who was born and raised in South Africa, was pursuing a technique based mostly on a robust perception that the rand would rise as soon as Cyril Ramaphosa emerged because the nation’s presumptive subsequent president after the African Nationwide Congress election on Dec. 18, 2017. Phillips’s attorneys argued that the Boxing Day trades have been motivated by this technique, not the $20 million possibility.
“What Neil did subsequent was exactly what somebody with a elementary view, an funding thesis and an possibility place that was about to be triggered would do,” protection lawyer Jenna Dabbs advised the jury in opening statements within the trial.
Phillips’s attorneys famous that different market contributors have been additionally making related trades based mostly on political developments in South Africa, chief amongst them Morgan Stanley. It was revealed at trial that the financial institution on Dec. 18, 2017, supplied to purchase again the Glen Point possibility for $13 million. Morgan Stanley additionally offered greater than $560 million in rand whereas Phillips was shopping for on Boxing Day.
Learn Extra: Soros-Backed Fund’s Christmas Night time Buying and selling Frenzy Led to Arrest
The case was a uncommon try by US prosecutors to implement a code of conduct within the loosely regulated forex markets, the place every day buying and selling typically tops $7 trillion. Up to now, the federal government has targeted extra on foreign-exchange collusion and price-fixing by massive banks fairly than a selected set of trades.
The protection concentrate on the sophistication of the alleged victims of market manipulation affords a preview of what attorneys are prone to argue within the Archegos case, wherein Hwang and his household workplace’s chief monetary officer, Patrick Halligan, are accused of deceiving Morgan Stanley, Credit score Suisse AG, Nomura and different banks into taking inventory positions that misplaced them greater than $10 billion when Archegos collapsed.
The case is US v. Phillips, 22-cr-138, US District Courtroom, Southern District of New York (Manhattan).
(Updates with element from courtroom, background on the case.)
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