Glen Point Capital co-founder Neil Phillips must face US charges that he tried to manipulate the foreign exchange market, clearing the way for an October trial in a closely watched case over a once-widespread practice employed by currency traders.
(Bloomberg) — Glen Point Capital co-founder Neil Phillips must face US charges that he tried to manipulate the foreign exchange market, clearing the way for an October trial in a closely watched case over a once-widespread practice employed by currency traders.
Phillips urged a federal judge in August to throw out the charges, saying the US is attempting to criminalize normal trading activity. Judge Lewis J. Liman on Friday rejected Phillips’s arguments, including his contention that the charges represent an improper reach of the US Commodities Exchange Act.
Read More: Glen Point Co-Founder’s Arrest Could Ripple Across Funds
The case has thrust into the spotlight the questionable practice known as “barrier chasing” — where traders bet a currency will break through a certain level. Some consider the practice, which was once common, as a legitimate trading strategy given the amount of risk it entails, while others say it’s market manipulation.
The charges against Phillips were announced by federal prosecutors in New York exactly one year ago after he was arrested while on holiday in Ibiza, Spain, on a request from the US. He is accused of attempting to drive down the exchange rate between the US dollar and the South African rand on the day after Christmas in 2017 to trigger a $20 million wager on the pairing.
“Mr. Phillips is innocent,” his lawyers at Kaplan Hecker & Fink LLP said in an emailed statement. “His trades were legitimate trades and entirely consistent with customary market practices, and he deceived no one.”
Liman said in his decision Friday that the law makes it clear that the section of the Commodities Exchange Act that forbids market manipulation is applicable outside the US when swaps-based conduct is at issue, and that Phillips’s actions “implicate substantial sums of US dollar, US financial institutions and US commerce.”
Glen Point was set to be purchased by Edward Eisler’s Eisler Capital in 2021 until the deal fell apart because of a disagreement on the level of risk Glen Point’s fund could take and Phillips’s firm later closed.
The case is US v. Phillips, 22-cr-138, US District Court, Southern District of New York (Manhattan).
(Updates with statement from Phillips’s lawyers)
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