As the global economic situation continues to deteriorate, regulators are continuing to discover evidence of numerous companies’ involvement in things like sharing inaccurate data and manipulating the market. This has been particularly noticeable in the forex sector, which led to charges against multiple such firms.

The latest example of this is the civil enforcement action that the Commodity Futures Trading Commission (CFTC) filed against two Glen Point Capital entities, as well as their co-founder and co-Chief Investment Officer, Neil Phillips. The filing took place this Thursday, December 15th, and it accused the entities in question of market manipulation to trigger the payout of binary options contracts.

The regulator brought additional charges against the defendants, accusing them of poor supervision of the trading activities among the employees, officers, and agents of the firm.

According to the filing, Glen Point Capital LLC and Glen Point Capital Advisors LP are both commodity pool operators registered with the CFTC. However, they held two major binary option contracts tied to the South African rand and USD exchange rate. The potential payout for the exchange rate between the two currencies dropping below a certain level was $30 million, which was apparently quite attractive for someone who can afford to manipulate the market.

How Neil Phillips manipulated the market

The official press release stated that Phillips did just that, attempting to manipulate the USD/ZAR rate not once but two times in December 2017. He made his move after noticing that there was low liquidity in the spot market, planning to push the price of the pair to the level which would allow his company to earn the payouts.

Phillips arranged a trade of a massive volume involving the pair, and he even expressed his intent to manipulate the market by informing the bank’s salesperson of his intention to trade through the rate of 12.50 ZAR per dollar. This was also the triggering point for the contracts.

The reports say that he asked about the pair’s volume several times, inquiring about how much he would have to sell in order to knock the price down to the level that he needed. And, as soon as the price did drop to the desired level, he immediately stopped selling.

Gretchen Lowe, the Acting Director of Enforcement, commented on the move by stating that manipulative and deceptive conduct that was undertaken in connection with swaps is harmful to the integrity of the market, as well as its participants. Anyone who commits this type of misconduct will be identified and held accountable.

For the moment, the regulator is seeking civil monetary penalties, as well as disgorgement of all ill-gotten gains. On top of that, it wants a permanent registration and trading ban on the defendants.