US federal prosecutors have charged Neil Phillips, a high-profile manager of a London-based hedge fund formerly backed by George Soros, with conspiracy to manipulate currency markets.
Phillips, 52, who co-founded Glen Point Capital, an emerging markets-focused hedge fund company in 2015, was arrested in Spain earlier this week, prosecutors at the Justice Department said Thursday.
Phillips is charged with conspiracy to commit commodity and wire transfer fraud, commodity and wire transfer fraud over a scheme to manipulate the South African rand exchange rate to effect a $20 million payout on an option his fund had purchased.
“As alleged, Mr. Phillips has maliciously manipulated global markets to defraud financial institutions for illicit profit,” said an assistant director of the FBI, Michael J Driscoll.
Phillips, who was not immediately available for comment, previously worked at London-based BlueBay Asset Management, where he managed a $1.4 billion global macro fund before leaving in 2014.
Glen Point’s subsequent debut, which is not mentioned in the indictment, was one of the most notable hedge fund launches in London at the time.
However, after poor performance, Glen Point was reportedly nearly acquired by Eisler Capital last year, before that deal collapsed and Glen Point employees moved to a number of different companies.
Eight of the team, including four investment professionals, then moved to Kirkoswald Capital, a US-based hedge fund firm founded by former GLG star trader Greg Coffey.
Earlier this week, those employees were suspended by Kirkoswald, people with knowledge of the company said. Kirkoswald declined to comment.
Balyasny Asset Management this week fired two research analysts who previously worked at Glen Point. Balyasny declined to comment.
No suggestion of wrongdoing has been made by the DOJ against another former Glen Point employee.
According to prosecutors, Phillips’ fund bought a so-called “one-touch” option in late October 2017. The option would pay out $20 million if the dollar-rand exchange rate fell below 12.5 at any time before expiration on January 2 of the following year. . Phillips’ fund then allocated a portion of this potential payout to an undisclosed client, entitling the client to $4.34 million of the $20 million.
On Boxing Day 2017, Phillips conducted hundreds of millions of dollars in dollar-edge transactions “with the express purpose of [dollar-rand] rate below 12.50,” the prosecutors said. For example, from shortly before midnight London time on Christmas Day until about 12:45 am on Boxing Day, he “personally” instructed a Singapore-based bank employee to sell about $725 million in dollars in exchange for rand. This pushed the exchange rate to just below 12.5, according to prosecutors.
“Once Phillips reached his goal and the [dollar-rand] price fell below 12.50 as a result of Phillips’ manipulative spot trading activity, Phillips immediately stated that: [the employee] stop trading,” prosecutors said.
In Bloomberg chat messages, Phillips wrote that “my goal is to trade to 50,” “[n]oath it to trade thru 50. 4990 is fine,” and “[g]and it through.”
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