The arrest of Glen Point Capital co-founder Neil Phillips for alleged foreign-exchange market manipulation threatened to ripple throughout the hedge fund trade as one other agency suspended staffers who beforehand labored with him.
Phillips, 52, was arrested in Spain on a request from the US earlier this week, federal prosecutors in New York mentioned Thursday in an announcement.
Kirkoswald Asset Management placed on depart a number of staff who used to work at London-based Glen Point and Balyasny Asset Management let go some former Glen Point employees who had joined the agency just lately, in accordance with folks with information of the matter.
An individual acquainted with the matter mentioned Kirkoswald was awaiting extra info and burdened that the agency had no motive to consider the staff had been concerned in the alleged market manipulation. But comparable warning might emerge elsewhere on Wall Street and inside the Square Mile, the place Phillips was related with a number of the largest names in the hedge fund universe.
Phillips was charged with conspiring to control the US dollar-South African rand alternate charge in late 2017.
The indictment, which was returned in March however beforehand sealed, describes at the least two co-conspirators, elevating the opportunity of prices towards extra folks.
William J. Stellmach, a lawyer for Phillips, didn’t instantly reply to a telephone name and an e mail looking for touch upon the costs.
Soros backing
The alleged market manipulation got here roughly two years after Phillips began Glen Point with his former BlueBay Asset Management colleague Jonathan Fayman. The pair raised practically $2 billion from traders together with George Soros.
Glen Point was set to be acquired in December by Edward Eisler’s Eisler Capital, which was additionally based in London in 2015 and equally targeted on macro buying and selling. But the deal fell aside in February due to a disagreement on the extent of threat Glen Point’s fund might take.
Eisler, onetime co-head of worldwide securities at Goldman Sachs Group Inc., has been increasing into different methods in a bid to compete with trade giants reminiscent of Millennium Management and Citadel for capital and expertise.
A spokesman for Eisler Capital confirmed Phillips by no means joined the agency and declined additional remark.
US regulators have been cracking down on market manipulation for the reason that monetary disaster greater than a decade in the past. Dozens of banks and merchants have been accused of rigging markets together with rates of interest and valuable metals, and even mendacity to prospects concerning the costs of asset-backed securities.
Option set off
According to prosecutors, Phillips’s hedge fund purchased a digital choice for the dollar-rand foreign money pair in late October 2017 that was set to run out on January 2, 2018. The choice had a notional worth of $20 million and a barrier charge of R12.50 to the greenback, entitling the fund to a fee in that quantity if the speed went beneath the barrier earlier than the expiration date.
With the choice set to run out, Phillips started making spot trades in an effort to push the alternate charge decrease late on Christmas Day, whereas directing a Singapore-based worker of an unidentified financial institution to promote $725 million in alternate for greater than R9 billion, in accordance with prosecutors. That pushed the alternate charge beneath the barrier, triggering the $20 million choice. Phillips collected greater than $15.6 million from the deal and additionally allotted $4.34 million to an unidentified consumer.
His Glen Point Global Macro Fund recorded one among its strongest month-to-month features in December 2017, up 6% and contributing to a 22% return that 12 months, in accordance with an investor doc seen by Bloomberg.
Other monetary establishments had been events to the transaction, prosecutors mentioned, together with a financial institution headquartered in Manhattan that paid the $20 million choice; one other Manhattan-based financial institution that served because the fund’s prime dealer; and a monetary companies agency that facilitated the acquisition of the choice. None of the corporations had been recognized by the federal government, however Glen Point recognized JPMorgan Securities LLC as its prime dealer in a submitting with the US Securities and Exchange Commission.
New cash
Phillips joined BlueBay, owned by Royal Bank of Canada, in 2005 as a cash supervisor. He began managing a macro technique inside the agency’s multi-strategy fund in 2007 and went on handle the agency’s standalone macro hedge fund two years later. BlueBay closed the $1.4 billion macro fund after Phillips and Fayman left in November 2014 to discovered Glen Point.
The agency additionally loved a excessive profile as a result of it was amongst a small variety of hedge funds to lift new cash in 2016 when traders had been pulling billions from the trade, in accordance with analysis agency eVestment.
Phillips, who’s at present in custody in Spain pending potential extradition, faces as a lot as 20 years in jail on probably the most severe prices, prosecutors mentioned.
The case is US v Phillips, 22-cr-138, US District Court, Southern District of New York (Manhattan).
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