Soros-Backed Hedge Fund Manager Convicted in Forex Scandal

<p>Neil
Phillips, the former Chief Investment Officer of London-based hedge fund Glen
Point Capital, has been convicted of commodities fraud. A federal jury in
Manhattan took less than a day to reach the verdict, although Phillips was
acquitted of a separate conspiracy charge. The case revolves around a $20
million foreign exchange (FX) options trade and offers a glimpse into the complex
world of currency trading.</p><p>London Hedge Fund Manager
Convicted of Forex Market Manipulation</p><p>The trial
centered on a trade Glen Point Capital entered in 2017, focusing on the
South African rand. Phillips had a bullish outlook on the currency, which
ultimately paid off as the rand strengthened against the US dollar. However,
prosecutors claimed that Phillips manipulated the market by trading the
dollar-rand currency pair (USD/ZAR) so heavily that he intentionally shifted
the exchange rate to profit from his options contract.</p><p>According
to the prosecutors, Phillips tampered with the USD/ZAR exchange rate twice
during December 2017, taking advantage of low trading
volumes in the spot market. His goal was to lower the currency pair's price to a specific threshold, enabling his firm to secure payouts from <a href="https://www.financemagnates.com/tag/binary-options/" target="_blank" rel="follow">binary
options</a>.</p><p>Phillips
defended his actions, stating that his trading was a legitimate strategy based
on his belief that the South African rand would strengthen. He attributed this
belief to a 2017 leadership vote in South Africa that would determine the
country's next president. Sean Hecker, Phillips' attorney, expressed strong
disappointment in the verdict, vowing to continue fighting for his client's
innocence.</p><p>"Moments
ago, 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," Damian Williams, the US Attorney, <a href="https://www.justice.gov/usao-sdny/pr/statement-us-attorney-damian-williams-conviction-neil-phillips">commented</a>
on the conviction.</p><p>As a result
of the conviction, Phillips now faces a maximum sentence of 10 years in prison.
A judge will determine the final sentencing at a later date. </p><p>"The
policing of the financial markets is critical to the health and sanctity of our
economy. I commend the Securities and Commodities Fraud Task Force of this
Office for continuing to be a global law enforcement leader in ensuring fair
market activity for investors at every level," Williams concluded.</p><p>Neil
Phillips, who launched Glen Point Capital in 2015 with financial backing from
George Soros, has a diverse background. Raised in South Africa, he began his
career trading at various banks, including Morgan Stanley. Interestingly, he
also served as the executive producer of a 2021 documentary about unprosecuted
Nazi war criminals.</p><p>Final
Outcome of the December 2022 Case</p><p>The latest
court decision marks the conclusion of a case that <a href="https://www.financemagnates.com/" target="_blank" rel="follow">Finance Magnates</a>
reported on in late 2022, when the US Commodity Futures Trading Commission (CFTC)
had initiated a civil enforcement action <a href="https://www.financemagnates.com/institutional-forex/cftc-charges-glen-point-capital-for-fx-market-manipulation/" target="_blank" rel="follow">against Neil Phillips and two Glen
Point Capital entities</a>. </p><p>Phillips
was accused of manipulating the market to activate payouts from two binary
options contracts. He was found to have traded a large volume of the USD/ZAR
currency pair to reach a specific exchange rate,
which was the trigger point for the binary options contracts. He even went so
far as to inquire about the amount he needed to sell in order to reach his target price
and ceased trading once that price was achieved.</p><p>Less than
two weeks ago, <a href="https://www.financemagnates.com/institutional-forex/neil-phillips-fx-case-puts-morgan-stanley-in-the-limelight/" target="_blank" rel="follow">news emerged that Morgan Stanley</a>, the alleged victim of
Phillips' actions, is also under scrutiny. Initially, prosecutors wanted to
keep Morgan Stanley's involvement under wraps, concerned that it might divert
the jury's attention. They feared the jury might compare the bank's actions to
Phillips' instead of focusing solely on the legal aspects. </p>

This article was written by Damian Chmiel at www.financemagnates.com.