Segantii hedge fund insider trading case moved to higher court in Hong Kong

By Summer Zhen

HONG KONG (Reuters) - An insider trading case against Asian hedge fund Segantii Capital Management, its high-profile British founder Simon Sadler and a former trader has been moved to a higher court in Hong Kong, a local court ruled on Wednesday.

The Eastern Magistrates' Court approved the prosecution’s request to transfer the case to a district court. The next hearing is scheduled to take place at the district court on July 2, the court ruled without providing reasons.

The maximum prison term a district court judge can impose is seven years, versus two to three years for the magistrate's court.

The case marks a turning point for one of Asia's biggest and oldest hedge funds, which has said it will refund investors, as well as a step toward heightened scrutiny of trading activities in the region.

The Hong Kong Securities and Futures Commission (SFC) said last month it had started criminal proceedings against Segantii, its founder and chief investment officer Sadler and former trader Daniel La Rocca on suspicion of insider dealing in the shares of a Hong Kong-listed company before a block trade in June 2017.

Sadler, dubbed Asia's "block trade king", is also the owner of his hometown soccer team, Blackpool Football Club.

Sadler, La Rocca and Segantii CEO Kurt Ersoy declined to comment on the charges on Wednesday outside a court hearing room. The company said last month it planned to "defend itself vigorously against the charges".

The accusation relates to insider information about Hong Kong-listed fashion chain Esprit Holdings, the court readout revealed, adding Segantii received the information from Tony Psarianos, a person connected to Esprit.

Psarianos was an investment banker at Merrill Lynch from 2007 to 2021, according to SFC licence records.

Segantii sold 1.57 million of listed Esprit shares and 132,000 of listed Esprit shares through offloading its long positions and short-selling, all on June 14, 2017, the court readout said, at an average execution price of $5.25 and $5.23 per share.

Esprit's share price slumped 24% in June 2017.

Esprit and Psarianos did not immediately respond to Reuters' requests for comment.

Segantii was established in 2007. A few weeks after the SFC prosecution began, Segantii informed its employees the fund was closing down, according a source with direct knowledge of the matter who was not authorised to speak with media. Segantii did not respond immediately to a request for comment.

Its flagship Asia-Pacific Equity Multi-Strategy Fund was up 2.8% for the first four months of 2024 after a 1.6% decline in 2023, according to a source who received data on the fund's performance. It delivered an annualised return of 12% since inception.

The fund managed about $4.8 billion at the end of March, according to a monthly letter seen by Reuters.

(Reporting by Summer Zhen; Additional reporting by Xie Yu; Editing by Jamie Freed)