On Thursday, the Commodity Futures Trading Commission (CFTC ) in the U.S. filed a civil enforcement action against two Glen Point Capital entities and Neil Phillips, their Co-Founder and Co-Chief Investment Officer, for market manipulation to trigger the payout of two binary options contracts.
Along with the preliminary charges, the regulatory agency brought additional charges against the defendants for failing to supervise the trading activities of their “officers, employees, and agents.”
Glen Point Capital Advisors LP and Glen Point Capital LLP are two CFTC-registered commodity pool operators. They were holding two sizeable binary option contracts tied to the U.S. dollar (USD) to South African rand (ZAR) exchange rate, with a $30 million payout condition if the USD/ZAR exchange rate fell below certain levels before the contract expiry.
CFTC Issues FX Manipulation Charges Against Glen Point Capital
According to the official press release, Phillips manipulated the USD/ZAR rate on two occasions in late December 2017 when there was low market liquidity in the spot market. He intended to push the currency pair price down to a certain level so that his company could earn the binary options payouts.
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He orchestrated trading a massive volume of the USD/ZAR pair. He even expressed his manipulative intent by explicitly informing the bank salesperson of his objective to trade through the rate of 12.50 rand per dollar, which is the triggering point of the binary options contracts. He even repeatedly asked about the volume of the currency pair he needed to sell to take the prices to the desired level. He immediately stopped selling when the target price of the currency pair was achieved.
FX Manipulation Charges in Focus by CFTC
“Manipulative and deceptive conduct undertaken in connection with swaps harms market integrity and market participants, and we will take action to hold those who commit this type of misconduct accountable,” said the Acting Director of Enforcement, Gretchen Lowe.
The CFTC is now seeking civil monetary penalties, disgorgement of any ill-gotten gains, and permanent trading and registration bans on the defendants. In addition, the agency wants a permanent injunction of the defendants against further regulatory violations.
Meanwhile, other U.S. agencies are doubling down on their actions against market manipulation. Most recently, the Securities and Exchange Commission charged eight financial influencers for using Twitter and Discord to pull off a $100 million pump-and-dump scheme.
