New York, NY – The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against Neil Phillips, Co-Founder and Co-Chief Investment Officer of Glen Point Capital Advisors LP and Glen Point Capital LLP, alleging a manipulative scheme to illegally trigger payouts on binary option contracts. The case was filed in the U.S. District Court for the Southern District of New York on December 15, 2022.
Phillips and the Glen Point entities are accused of manipulating the U.S. dollar (USD) to South African rand (ZAR) exchange rate in December 2017. The alleged scheme centered around two swaps contracts that would pay out $30 million to commodity pools managed by Glen Point Capital if the USD/ZAR exchange rate fell below specific levels. According to the CFTC complaint, Phillips intentionally drove down the exchange rate during a period of low liquidity around Christmas to ensure the contracts triggered payouts before their expiration.
The complaint details how Phillips orchestrated massive trades in the USD/ZAR currency pair, specifically targeting the 12.50 rand per dollar barrier level. Through communications with a salesperson at the executing bank, Phillips allegedly explicitly stated his objective to trade through this level and inquired about the volume of sales needed to move the market. Once the rate breached the barrier, Phillips immediately halted trading and requested proof of the breach.
The CFTC alleges that Phillips’ actions directly resulted in the $30 million payout for the commodity pools. Furthermore, the complaint accuses Glen Point Capital of failing to adequately supervise Phillips’ trading activities and enforce its compliance program.
The CFTC is seeking civil monetary penalties, disgorgement of ill-gotten gains, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA). Acting Director of Enforcement Gretchen Lowe stated the agency will hold accountable those who engage in manipulative and deceptive conduct impacting market integrity.
The investigation is ongoing, and the defendants have yet to respond to the charges in court. The CFTC’s complaint seeks full relief under the CEA.
Source: CFTC.gov
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