Jury Convicts Hedge-Fund Manager Accused of Rigging Foreign-Exchange Market

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A London hedge-fund manager accused of manipulating the foreign-exchange market was convicted Wednesday of fraud in a trial that opened a window into a complex corner of the global currency-trading business.

A federal jury in Manhattan deliberated for less than a day before finding Neil Phillips guilty of commodities fraud. The jury acquitted Phillips, the former chief investment officer of Glen Point Capital, of a separate conspiracy charge.

The trial focused on a $20 million foreign-exchange options trade that Glen Point entered in 2017. Phillips had a bullish view on the South African rand, and the contract paid off because that currency strengthened against the U.S. dollar. But prosecutors argued Phillips rigged the outcome by trading so much of the dollar-rand currency pair in December of that year that he deliberately moved the exchange rate past the level needed to profit on his options contract.

“A jury unanimously found that Neil Phillips intentionally manipulated the foreign exchange, or ‘FX’ market—the world’s largest decentralized financial market—in order to trigger a $20 million windfall for his hedge fund under a barrier option,” Manhattan U.S. Attorney Damian Williams said. “The policing of the financial markets is critical to the health and sanctity of our economy.” The judge set sentencing for March 14.

The case against Phillips, 53 years old, was prosecutors’ latest move to rein in practices in the unregulated foreign-exchange market, which trades $7.5 trillion around the clock. The Justice Department brought a series of criminal cases over the past decade that accused bank traders of coordinating their efforts to rig currency rates. The world’s biggest banks paid over $10 billion in fines worldwide to resolve the probes.

Phillips argued that his trading was a legitimate part of his overall strategy betting on the rand. He believed the currency would strengthen as a result of a 2017 leadership vote that determined the next president of South Africa. Phillips said he didn’t manipulate the exchange rate but was trading to enhance the value of his wager on the rand.

“We are extremely disappointed by the verdict and believe strongly that Neil Phillips is innocent of the one charge on which he was found guilty,” said his attorney, Sean Hecker. “We will continue to fight for the right result.”

Phillips, who launched Glen Point Capital in London in 2015 with backing from financier George Soros, grew up in South Africa and began his career trading at a series of banks, including Morgan Stanley. He was executive producer of a 2021 documentary about the thousands of Nazi war criminals who were never prosecuted for their roles in the Holocaust.

Phillips was convicted of commodities fraud and faces a maximum sentence of 10 years in prison. A judge will decide his sentence at a later phase.

Glen Point bought a foreign-exchange option from Morgan Stanley in October 2017, ahead of the election for leader of the African National Congress. The contract, known as a barrier option, was written to pay off if the exchange rate touched 12.50 rand per dollar.

Phillips believed the rate would approach that level if Cyril Ramaphosa, the candidate seen as more friendly to business, won the ANC election, according to court records. Ramaphosa did win and later became president of South Africa.

Prosecutors used some of Phillips’s words against him at the trial. While the rand gained after Ramaphosa was elected to steer the ANC, the exchange rate didn’t immediately get to 12.50.

“Need to trade thru 50,” Phillips wrote in one of the chats that prosecutors cited in the indictment.

With just a few days until the option expired, Phillips, sitting in South Africa, directed a bank in Singapore to sell dollars for rand until the rate crossed that price, prosecutors said. It was easier to move the price at that time because it was the day after Christmas and the London and U.S. markets were quiet, the government said.

“He cheated by manipulating the exchange rate to win that bet,” prosecutor Kiersten Fletcher said during last week’s opening statements, according to a trial transcript.

In the same time frame that Phillips sold $725 million to buy rand, Morgan Stanley bought nearly $600 million while selling rand, according to court filings. Phillips argued that both parties traded for legitimate, self-interested reasons as the price of the asset neared the 12.50 barrier.

This article was originally sourced from www.msn.com