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Segantii to shutter and return capital as insider trading case escalates

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Simon Sadler’s $4.8bn Asian hedge fund Segantii Capital Management has said it will wind down and return capital to its investors “in an orderly manner”, with about 140 employees across Hong Kong, New York and London affected by the decision.

The Financial Times quoted a spokesperson for the firm on Thursday: “We have always believed at Segantii that it is a great responsibility and privilege to professionally manage money and we have never taken that lightly.

“We have decided, however, that at this time, it is in the best interests of our investors to return their capital in an orderly manner.”

According to one of Bloomberg’s sources, the firm faced nearly $1bn of withdrawal requests, while the company separately said on Thursday that it would suspend redemptions. Previously, Segantii allowed only monthly or quarterly redemptions. During a call also on Thursday, Sadler and CEO Kurt Ersoy deferred questions from staff on compensation and jobs, while another of Bloomberg’s sources confirmed that a new hire due to start next week had been informed that they would no longer be needed.

The insider trading case against Segantii, Sadler, its founder and owner of Blackpool Football Club, and former trader Daniel La Rocca will also move to Hong Kong’s District Court, which can impose sentences of up to seven years in prison, Fortune reported.

Hong Kong authorities plan to transfer the case from the lower-level Magistrates’ Court, which is currently handling the proceedings and can only impose two to three year sentences. The decision to transfer is not yet final and may still change, according to Fortune’s sources. 

The transfer to a higher court was anticipated following the initial Magistrates’ Court hearing, as all criminal proceedings in Hong Kong commence at this level and the city-state does not have a specialised court for financial crimes. However, prosecutors chose the District Court over the High Court — which has no general limit on imprisonment length, with insider trading convictions carrying a maximum sentence of 10 years — the reasons for which are unclear. 

Authorities recently charged Segantii, Sadler and La Rocca with insider dealing related to a 2017 block trade. Sadler and La Rocca appeared in the Eastern Magistrates’ Court on 2 May but did not enter a plea, with the case being adjourned until 12 June. 

The ongoing case adds to Segantii’s regulatory challenges. In December, South Korean regulators fined Segantii KRW1.48bn ($1.08m) “in connection with certain hedging trades”, the hedge fund disclosed in an April filing with the US SEC. 

Earlier this month, Bloomberg reported that New York-based bank JPMorgan Chase & Co would not engage with Segantii on new block trades and initial public offerings globally.

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