South African-born trader guilty of manipulating the rand’s value

Glen Point Capital co-founder Neil Phillips was convicted of manipulating the foreign exchange market to hit a “barrier” rate and trigger a $20 million option.

The former hedge fund executive was found guilty Wednesday of commodities fraud by a jury in federal court in Manhattan after a weeklong trial.

Prosecutors had accused Phillips of directing $725 million in trades on Dec. 26, 2017, to intentionally raise the value of the South African rand against the US dollar.

Phillips, 53, was found not guilty of a related conspiracy charge. He faces a maximum of 10 years in prison on the fraud count. US District Judge Lewis Liman scheduled his sentencing for March 14.

Phillips had argued that his actions were part of a longer-term strategy and also fell within standard industry practices associated with barrier trading.

He contended that alleged victim Morgan Stanley, which sold Glen Point the option for around $2 million, engaged in similar trades to hedge its own risk from the bet.

The verdict is a major win for Manhattan federal prosecutors as they prepare for a much-larger market manipulation case early next year against Archegos Capital co-founder Bill Hwang, who similarly plans to argue that the banks he allegedly cheated knew what they were doing.

The jury deliberated for less than half a day before deciding the case. Phillips didn’t visibly react as the verdict was read. Afterwards, in an unusual move, he shook hands with the prosecutors before being embraced by his own lawyers.

“We’re disappointed,” Sean Hecker, one of Phillips’s lawyers, said outside the courtroom. “We continue to believe very strongly in Neil’s innocence. We don’t believe he should have been charged in the first place and we’ll keep fighting.” The defense said it would ask Liman to set aside the verdict and file an appeal if that wasn’t successful.

The indictment of the high-flying London-based trader, whose George Soros-backed fund was one of the biggest launches in 2015, reverberated across the world’s financial capitals when it was unsealed in September 2022.

Phillips’s dramatic arrest in Ibiza at the request of US authorities led to the suspension of several former staffers who’d joined other funds from Glen Point.

At the heart of the prosecutors’ case was a one-hour buying binge of the South African currency in the early hours of December 26, 2017. The “Boxing Day trades” effectively moved the exchange rate to 12.50 rand against the dollar, the barrier at which the Morgan Stanley option would pay out.

According to the government, Phillips resorted to market manipulation because the option was set to expire on Jan. 2, 2018.

Jurors were shown transcripts of Bloomberg chats in which Phillips discussed how “to break 50” with the Singapore-based trader at Nomura Holdings, who placed his orders. “My aim is to trade thru 50,” Phillips said in one message. “Get it thru,” he said in another.

Prosecutors also played an earlier phone conversation in which Phillips told one of his Glen Point traders that he might need him “to start f*cking around in dollar/rand tonight.”

‘Investment Thesis’

The prosecution case notably didn’t rely heavily on eyewitness testimony. The Nomura salesperson who worked with Phillips, Rahul Kamath, was one of two uncharged co-conspirators described in the indictment, but neither of them testified at the trial.

The defense presented evidence that Phillips, who was born and raised in South Africa, was pursuing a strategy based on a strong belief that the rand would rise once Cyril Ramaphosa emerged as the country’s presumptive next president after the African National Congress election on Dec. 18, 2017. Phillips’s lawyers argued that the Boxing Day trades were motivated by this strategy, not the $20 million option.

“What Neil did next was precisely what someone with a fundamental view, an investment thesis and an option position that was about to be triggered would do,” defense lawyer Jenna Dabbs told the jury in opening statements in the trial.

Phillips’s lawyers noted that other market participants were also making similar trades based on political developments in South Africa, chief among them Morgan Stanley.

It was revealed at trial that the bank on Dec. 18, 2017, offered to buy back the Glen Point option for $13 million. Morgan Stanley also sold more than $560 million in rand, while Phillips was buying on Boxing Day.

The case was a rare attempt by US prosecutors to enforce a code of conduct in the loosely regulated currency markets, where daily trading often tops $7 trillion. In the past, the government has focused more on foreign exchange collusion and price-fixing by big banks rather than a specific set of trades.

In a statement following the verdict, Manhattan US Attorney Damian Williams said the “policing of the financial markets is critical to the health and sanctity of our economy” and commended his office’s prosecutors for working to ensure “fair market activity for investors at every level.”

Phillips’s trial began and ended while Williams’s office was prosecuting its fraud case against FTX co-founder Sam Bankman-Fried.

A verdict in that case could come as soon as next week, following the former crypto mogul’s planned testimony in his own defense.

The defense focus on the sophistication of the alleged victims of market manipulation offers a preview of what lawyers are likely to argue in the Archegos case, in which Hwang and his family office’s chief financial officer, Patrick Halligan, are accused of deceiving Morgan Stanley, Credit Suisse AG, Nomura and other banks into taking stock positions that lost them more than $10 billion when Archegos collapsed.


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