Hedge fund co-founder Neil Phillips charged with market manipulation

US federal prosecutors have charged Neil Phillips, a high-profile manager of a London-based hedge fund previously backed by George Soros, with conspiracy to manipulate currency markets.

Phillips, 52, who co-founded Glen Point Capital, an emerging markets-focused hedge fund firm, in 2015, was arrested in Spain earlier this week, Department of Justice prosecutors said on Thursday.

Phillips is charged with conspiracy to commit commodities and wire fraud, commodities fraud, and wire fraud over a plan to manipulate the South African rand exchange rate in order to trigger a $20mn payout on an option his fund had bought.

“As alleged, Mr Phillips maliciously manipulated global markets in order to defraud financial institutions for illicit profit,” said an FBI assistant director Michael J Driscoll.

Phillips, who could not immediately be reached for comment, previously worked at London-based BlueBay Asset Management, where he managed a $1.4bn global macro fund before leaving in 2014.

The subsequent debut of Glen Point, which is not mentioned in the indictment, was one of London’s highest-profile hedge fund launches at the time.

However, following poor performance Glen Point was last year reportedly closed to being acquired by Eisler Capital, before that deal collapsed and Glen Point employees moved to a number of different firms.

Eight of the team, including four investment professionals, subsequently moved to Kirkoswald Capital, a US-based hedge fund firm launched by former GLG star trader Greg Coffey.

Earlier this week those staff were suspended by Kirkoswald, said people with knowledge of the firm. 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 against any other former Glen Point employee by the DoJ.

According to prosecutors, Phillips’s fund bought a so-called ‘one-touch’ option in late October 2017. The option would pay out $20mn if the dollar-rand exchange rate fell below 12.5 at any time before expiry on January 2 the following year . Phillips’s fund then allocated a portion of this potential payout to an unnamed client, entitling the client to receive $4.34mn of the $20mn.

On Boxing Day 2017 Phillips directed hundreds of millions of dollars of dollar-rand trades “for the express purpose of artificially driving the [dollar-rand] rate below 12.50”, prosecutors said. For instance, from shortly before midnight London time on Christmas Day until around 12:45am on Boxing Day, he “personally directed” a Singapore-based employee of a bank to sell around $725mn in dollars in exchange for rand. This, according to prosecutors, pushed down the exchange rate to just below 12.5.

“As soon as Phillips had achieved his objective and the [dollar-rand] rate fell below 12.50 due to Phillips’s manipulative spot-trading activity, Phillips immediately directed that [the employee] trading cease,” said prosecutors.

In Bloomberg chat messages, Phillips wrote that “my aim is to trade thru 50,” “[n]eed it to trade thru 50. 4990 is fine,” and “[g]and it thru.”

laurence.fletcher@ft.com

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