The stock trader and businessman Neil Phillips was indicted this summer by the U.S. Department of Justice on charges of market manipulation for his convoluted currency trading tactics. It was then that the FBI went into action and the businessman, co-founder of the London-based Glen Point Capital fund, was arrested on Ibiza at the end of August while on vacation.
The Ibiza court in charge of the case finally ruled to release the businessman at the end of September but ordered him to surrender his passport and remain on Ibiza pending the hearing of extradition.
Since his arrest, Philips has been on the island, in the house he rented for his vacation five months ago, but his legal situation has worsened. According to Bloomberg agency, the indictment of the US Department of Justice is added to the lawsuit filed on Thursday by the U.S. Commodity Futures Trading Commission (CFTC) before a federal court in Manhattan against the businessman and his company, Glen Point Capital, also for currency manipulation
Wall Street, divided
While Phillips, a 52-year-old Briton, awaits extradition on Ibiza, traders on Wall Street have entered into a debate in which, while some believe the businessman has committed a crime, many others believe that his strategy, while aggressive, is part of the stock market ‘game’
As Cinco Días explains, prosecutors accuse Phillips of having participated in foreign exchange operations with hundreds of millions of dollars to make the exchange rate between the dollar and the South African Rand fall below a level of 12.5 rand. The objective was to trigger a $20 million payout on an option that his fund had purchased, through a contract known as a barrier option: options that close automatically if the price of the underlying market on which they are based reaches a certain level. The U.S. authorities consider this operation to be a fraud. For many traders on Wall Street, it is a valid market maneuver
Businessman faces several years in prison
Regardless of the ways this operation may be approached, what is certain is that Damian Williams, U.S. Attorney for the Southern District of New York, in a September 1st brief to which Diario de Ibiza has had access, accuses him “of conspiracy to commit commodities fraud, conspiracy to commit wire fraud in connection with a scheme to manipulate the U.S. dollar (“USD”)/South African Rand (‘ZAR’) exchange rate to fraudulently trigger a $20 million payment under a barrier options contract.” All of these allegations would total some 40 years in prison.
In the same DOJ brief, FBI Deputy Director Michael J. Driscoll states, “As alleged, Mr. Phillips maliciously manipulated global markets to defraud financial institutions for illicit gain. The FBI is determined to root out this type of fraud so that the financial markets remain a level playing field. As shown today, the FBI will find fraudulent players no matter where they are in the world and will seek to bring them back to the United States to face the consequences of their actions in our federal criminal justice system.”
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