Manipulable in more ways than one. (Giovanni Dall’Orto)
If there are two things Barclays does, if not well, then at least a lot, it’s manipulate markets and get sued. They are related. Libor manipulation begets lots of Libor–related lawsuits (and some comically large fines), electricity market manipulation begets FERC lawsuits, and on down the line, to (allegedly!) messing around with any interest rate ending in –bor. And more, allegedly!
The latest (actually not that recent, since the lawsuit is a year old but was only recently made public) comes courtesy of Red Kite Management. You see, it’s been a rough go lately for commodity hedge funds like Red Kite, and lots and lots of them have been dying. Red Kite and its noble leader, Michael Farmer, think they’ve figured out why: Because Barclays was fucking with them.
In the court documents, Red Kite said Barclays traders in the commodities division, which handled proprietary trading, were able to view open positions from the prime brokerage division, which managed Red Kite’s account.
The proprietary traders knew prime brokerage “had only one client of substantial size” in the non-ferrous metals market and could figure out Red Kite’s positions, the fund alleged….
According to Red Kite, Barclays took proprietary trading positions opposing those of the fund, and then attempted to manipulate the LME copper market by “repeatedly bidding large sums for copper positions in the moments before the close of ‘kerb’ trading on the LME”.
As a result, Red Kite was “effectively forced by Barclays to close out positions at a time and in a manner profitable to Barclays.”
This was a very profitable business, indeed, for Barclays, according to Red Kite. So profitable that it was the subject of a daily e-mail and occasional meeting at the London Metals Exchange to which rival hedge funds’ brokers were invited. How profitable, exactly?
As a consequence of the alleged actions by Barclays, the Red Kite funds lost as much as $850 million, an estimate based on a tally of losses in the court filing that includes losses to net asset value, fees, damages, and management income.
Now, Red Kite manages $2 billion. So if it’s right about Barclays manipulating every single market it touched, it’s in line for a handsome 40%-plus return on its legal investment here.
Barclays Sued by Fund for $850 Million in Metal Market Abuse [Bloomberg]
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