Neil Phillips, the co-founder and chief investment officer of a UK-based hedge fund, was charged by US prosecutors for conspiring to rig trades involving the US dollar-South African rand currency pair to ultimately trigger a payout to his firm worth $20-million.
Phillips’s only link to South Africa is that he executed currency trades of the local rand while he was in the country on 26 December, also known as Boxing Day. But in executing trades in the dollar-rand exchange rate, he “engaged in a scheme to intentionally and artificially manipulate” currency markets.
On a normal day, there is a hive of activity in the currency market, with traders executing rand-dollar currency pair trades worth about $51-billion every day. But December is usually a quiet month for financial markets because traders are usually on their Christmas holiday and there are thin trading volumes in currency markets.
In doing so, Phillips, who was in South Africa at the time, began making trades to push the exchange rate lower. He directed a Singapore-based employee of an unidentified bank — using a Bloomberg chat room — to sell $725-million in exchange for more than R9-million , according to US prosecutors. In other words, Phillips sold dollars to receive rands, through his hedge fund.
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