Insider trading case against hedge fund Segantii Capital Management Ltd. and its founder Simon Sadler are being sent to Hong Kong’s highest court, which could impose longer sentences for convictions, according to people familiar with the matter.
Hong Kong authorities plan to transfer criminal proceedings to the district court from the magistrate’s court, which is currently hearing the case, the sources said. The district court can impose a sentence of up to seven years in prison, compared to two to three years in a lower court. The plan could still change, the people said, asking not to be identified discussing private matters.
In one of the city’s most high-profile insider trading cases, authorities this month charged Seganti, as well as Sadler and former trader Daniel La Rocca, with insider trading related to a 2017 block trade. Sadler and La Rocca were arraigned in the city’s Eastern Magistrate Court. May 2 without a statement. The hearing of the case was postponed until June 12.
The case was expected to be transferred to one of Hong Kong’s highest courts after first hearing in the magistrate’s court, where all criminal cases in the city begin. Hong Kong does not have a specialized court for financial crimes. Different courts may refer cases depending on the severity of the crime and the sentence sought by the prosecutor.
Prosecutors chose not to take Seganthi’s case to the High Court, which can hand down even longer sentences than at the district level, the people said. It is unclear why they chose the district court. There is no general limit on the length of imprisonment that the High Court can impose, meaning that it can impose the maximum penalty set out in the legislation associated with the offence. Insider trading in Hong Kong carries a maximum penalty of 10 years in prison.
The District Court is also different in that it usually hears cases before a single judge, while the High Court usually consists of a judge and jury, according to legal review from the Law and Technology Center of the University of Hong Kong.
Hong Kong’s Securities and Futures Commission, the Ministry of Justice and Segantii declined to comment.
The charges mark the latest regulatory challenge for Segantii, a star hedge fund in Asia often credited with helping banks negotiate complex trades, including large package deals. In December, South Korean regulators fined Seganthi 1.48 billion won ($1.08 million) for “certain hedging transactions.”
Sadler, a former trader at Dresdner Kleinwort Wasserstein and Deutsche Bank AG, founded the Hong Kong firm in 2007 with $26.5 million in capital. He has built Segantii into a regional giant with offices in London, New York and Dubai, trading globally, with a particular focus on Asia Pacific equities and equity-linked securities. The company had $4.77 billion in assets under management at the end of April, according to an update sent to investors.
A company spokesman said earlier this month that “Seganti intends to vigorously defend himself against the allegations.”