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Hedge fund co-founder Neil Phillips charged with market manipulation

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

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

Phillips has been charged with conspiracy to commit commodities and wire fraud, commodity fraud, and wire fraud over a plan to manipulate the exchange rate of the South African Rand to trigger a payment of $20 million on options purchased by his fund. has been prosecuted for

“As alleged, Mr. Phillips maliciously manipulated global markets to defraud financial institutions of illicit profits,” said FBI Deputy Director Michael J. Driscoll.

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

Glenpoint’s subsequent debut, not listed in the indictment, was one of London’s most high-profile hedge fund launches at the time.

But in the aftermath of poor performance, Glen Point was reportedly on the verge of being acquired by Eisler Capital last year, but the deal fell through and Glen Point’s employees moved to various companies.

The team of eight, including four investment professionals, then moved to Kirkoswald Capital, a US-based hedge fund firm founded by former GLG star trader Greg Coffey.

Those staffers were suspended by Kirkoswald earlier this week, people familiar with the company said. Kirkoswald declined to comment.

Balyasny Asset Management laid off two research analysts who previously worked at Glen Point this week. Baryasny declined to comment.

The DOJ has made no allegations of wrongdoing against other former Glenpoint employees.

Phillips funds purchased the so-called “one-touch” option in late October 2017, according to prosecutors. This option would pay out $20 million if the dollar-to-rand exchange rate fell below his 12.5 before maturity on January 2nd of the following year. Phillips funds then allocated a portion of this potential payout to an unnamed client, giving the client the right to receive $4.34 million of his $20 million.

On Boxing Day 2017, Phillips “directed hundreds of millions of dollar rand transactions for the express purpose of artificially moving the market. [dollar-rand] A rate of less than 12.50,” prosecutors said. For example, from just before midnight London time on Christmas to about 12:45 a.m. on his boxing day, he offered employees of a Singapore-based bank about $725 million dollars in exchange for rand. I “personally ordered” it to sell. Prosecutors say this has pushed the exchange rate down to just below 12.5.

“As soon as Philips achieved its objective, [dollar-rand] Phillips quickly directed it as manipulative spot trading activity drove the rate below 12.50 [the employee] We will stop trading,” the prosecutor said.

“My goal is to trade up to 50,” Phillips wrote in a Bloomberg chat message.[n]Must trade up to 50. 4990 is enough” and “[g]go through it.

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