Thursday, June 13, 2024

CRIMINAL CAPITALI$M
Segantii Case Moves to District Court, Hong Kong Judge Rules





Kiuyan Wong and Bei Hu

Wed, Jun 12, 2024, 

(Bloomberg) -- Segantii Capital Management’s insider trading case will move to a Hong Kong District Court that can hand out longer prison sentences, as details emerged about the hedge fund’s alleged transgressions at a hearing on Wednesday.


The prosecution’s request to transfer the case was granted at an Eastern Magistrates’ Court hearing. The next hearing is scheduled to take place on July 2 at the District Court, which can mete out as much as seven years’ jail time for insider dealing convictions. The plan to transfer to a higher level court was reported earlier by Bloomberg News.

Hedge fund firm Segantii, along with founder Simon Sadler and former long-time trader Daniel La Rocca, face accusations by Hong Kong’s Securities and Futures Commission of acting on insider information prior to a block trade in 2017.

That block trade was the sale of a 10% stake in apparel retailer Esprit Holdings Ltd. on June 15 of that year by another hedge fund firm, Lone Pine Capital LLC, Bloomberg News reported this week.

Segantii allegedly received inside information from Tony Psarianos, who was identified as a person connected to Esprit in a court readout. Psarianos previously worked at Bank of America’s Merrill Lynch division, regulatory records showed.

The hedge fund sold about $1.14 million worth of Esprit shares on or about June 14, a day before the block trade, through Segantii’s account with UBS, according to the court summons. The trades included shares that Segantii already held as well as short sales and took place before Esprit’s block trade.

Esprit shares fell 25% over five trading sessions starting June 14, according to data compiled by Bloomberg.

On Wednesday morning, Sadler, La Rocca and their lawyers sat in a packed courtroom alongside people who were charged with lesser offenses such as careless driving, importing alternative smoking products, and operating unlicensed restaurants. A few middle-aged individuals helped to reserve seats for Sadler and his entourage when they were delayed by traffic.

Sadler, who was represented by barrister Benson Tsoi, was accompanied by Segantii’s Chief Executive Officer Kurt Ersoy, who represented the investment firm. La Rocca, whose attorneys include Joseph Lee and Alan Linning, sat separately from his former bosses. Niral Maru, Segantii’s chief compliance officer, also attended the hearing. No plea was taken Wednesday.

Sadler and La Rocca’s bail terms were extended on the same conditions as before. The SFC was represented by its own counsel, Jenny Wai. The case will be handled by Hong Kong’s Department of Justice when it is heard before the District Court.

Segantii, which was founded in Hong Kong in late 2007, was one of Asia’s largest and best-performing hedge funds with $4.77 billion in assets under management at the end of April. It was a prized client of Wall Street banks and a big buyer of shares in public stock offerings as well as block trades, which are off-exchange sales of large chunks of shares.

Three weeks after the insider charges became public, Segantii came to an abrupt decision to wind down its hedge fund and return outside capital to its investors.

Its directors determined the risks associated with the legal action may adversely impact its ability to implement the investment strategy, according to a letter to investors seen by Bloomberg News.

(Updates with no plea was taken in ninth paragraph. An earlier version was corrected to say Segantii traded through its account with UBS per the summons in sixth paragraph.)

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