Hedge Fund Traders Suspected of Insider Trading in the British Pound, Following a Dinner With Liz Truss.
This dinner took place a week before the announcement of his shock economic program for the UK.
Did some hedge fund traders get the news about Liz Truss' economic program before others? Her announcement caused rates to soar and the pound to plunge late last week. Insider trading in foreign exchange is much rarer than in stocks, but not impossible.
According to the Sunday Times, the British Prime Minister held a dinner with the hedge fund managers who supported her a week before the announcement of her economic program. Was any sensitive information distilled there in a more or less explicit manner?
According to a source from the daily newspaper who attended the dinner, the hedge funds that attended the dinner made a lot of money thanks to the plunge of the British pound...
They could have made their decision on the currency before or after this dinner. One of the managers present, Crispin Odey, is known to sell the pound fairly regularly. He had made 220 million pounds during the Brexit shock. He told Bloomberg on Monday that he believes the British currency is "still vulnerable."
His hedge fund, invested in the major markets (stocks, debt, currencies), was earning 140% as of September 14, 2022. Before the controversial dinner, in the first 15 days of September 2022, speculative bearish positions taken by hedge funds on the British pound had already risen by 17% in U.S. futures markets to nearly $4 billion, according to Vanda Research.
In the past four weeks, hedge funds have doubled their sales of sterling.
To bet on the fall of the British currency, hedge funds can also use options or trade on over-the-counter markets where data is not public. Tulip Siddiq, a politician and member of the Labour Party, has asked the British market regulator, the Financial Conduct Authority, to open an investigation.
In addition to possible insider trading in the currency, she believes it is necessary to determine "whether it is possible that leaks or information provided by this Tory government to its rich friends contributed to the collapse of the pound," according to her statements to the Evening Standard.
Apocalyptic panorama
The porosity between the City and the Conservative camp is once again being exploited by their Labour opponents. Suspicions would have been even stronger if Rishi Sunak, Liz Truss' rival in the Conservatives, had been appointed Prime Minister. The former Goldman Sachs banker worked as a hedge fund manager at activist TCI before setting up his fund. He would have been the first former trader to enter 10 Downing Street.
In an interview given to The Spectator on August 31, 2022, Rishi Sunak painted an apocalyptic picture of the financial markets if Liz Truss was elected. The UK would then, he said, suffer a currency crisis the likes of which it has not seen since the 1970s. It seems he was right...
More reading
Do What I Say, Not What I Do — The Fed at the Heart of an Insider Trading Scandal. Jerome Powell could have done without this scandal at a time when Joe Biden must decide whether or not to extend his term for four years.