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A New York jury has convicted Neil Phillips, the high-profile manager of a London-based hedge fund previously backed by George Soros, over an alleged scheme to manipulate the US dollar to South African rand exchange rate as part of a ploy to trigger a $20mn options payment.
The 53-year-old Briton, who co-founded the emerging markets-focused Glen Point Capital in 2015, was found guilty on Wednesday of commodities fraud after a week-long trial. He was acquitted on a related count of conspiracy to commit commodities fraud.
Prosecutors had accused Phillips of attempting to artificially move the price of the dollar below the strike price for a “one touch option” his fund bought in late 2017. That instrument paid $20mn if the rand-dollar pairing hit a particular level before January 2018.
They alleged that on Boxing Day of 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”, and “personally directed” a Singapore-based employee of a bank to sell about $725mn in dollars in exchange for rands, which pushed down value of the dollar-rand exchange rate.
“As soon as Phillips had achieved his objective and the [dollar-rand] rate fell below 12.50 due to Phillips’s manipulative spot-trading, Phillips immediately directed that [the employee] cease trading,” prosecutors wrote in the indictment.
His lawyers had argued in court filings that the trades were all lawful, consisting of “legitimate transactions made on the open market”, and that the alleged victims were sophisticated financial institutions and investors.
In a statement, Damian Williams, the US attorney for the Southern District of New York, welcomed the verdict, saying a jury had found that Phillips had “intentionally manipulated . . . the world’s largest decentralised financial market”.
“The policing of the financial markets is critical to the health and sanctity of our economy,” he added, commending his office for “continuing to be a global law enforcement leader in ensuring fair market activity for investors at every level”.
Phillips will be sentenced at a later date. He faces a maximum of 10 years in prison.
“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 Sean Hecker, a lawyer for the hedge fund manager. He added: “We will continue to fight for the right result.”
Phillips previously worked at London-based BlueBay Asset Management, where he managed a $1.4bn global macro fund before leaving in 2014.
Glen Point Capital stopped trading in February last year, according to company filings.