Poor Louis Bacon. The founder of Moore Capital tries so hard to avoid attention.
However, in the past few months, Bacon has had trouble keeping his $14 billion in assets firm out of the spotlight. The most dramatic example: A naked dead body was recently found in the Jacuzzi on his Bahamas estate. According local reports, the individual was Dan Tuckfield, Bacon’s house manager who lived on a houseboat docked at a marina on the estate, who was said to have died of coronary artery disease. Nothing scandalous.
Still, it comes on the heels of two regulatory issues that have been embarrassing to Bacon, a normally super-secretive hedge fund manager who hails from North Carolina but currently spends a lot of his time in his firm’s London office.
Earlier this month the Commodity Futures Trading Commission settled charges that three Moore entities attempted to manipulate the settlement prices of platinum and palladium futures contracts on the New York Mercantile Exchange. The CFTC also settled charges that Moore Capital Management, LP failed to diligently supervise the handling of MCM’s commodity interest business.
The CFTC Order called for Moore to pay a $25 million civil penalty and restricted Moore’s registrations as Commodity Pool Operators and/or Commodity Trading Advisors for three years. The order also imposed a two-year restriction on Moore’s trading within 15 minutes of and during the closing period of the platinum and palladium futures and options markets.
According to the CFTC, from November 2007 through May 2008, a former MCM portfolio manager attempted to manipulate the settlement prices of platinum and palladium futures contracts traded on the NYMEX by engaging in a practice known as “banging the close.” Specifically, the individual’s orders were entered in a manner designed to exert upward pressure on the settlement prices of the platinum and palladium futures contracts, according to the CFTC.
The regulatory agency asserted that Moore failed to supervise diligently the former manager’s trading and failed to have sufficient policies and procedures designed to detect and deter the violations found in the order.
The CFTC did not single out Bacon or any other principle, however.
Meanwhile, back in March Julian Rifat, a London-based Moore trader was arrested in the United Kingdom as part of a broader insider trading investigation. This is not Moore’s first run-in with British authorities related to insider trading. Back in September 2008, Steven Harrison, then a portfolio manager for Moore Credit Fund, paid a $78,000 fine to settle inside charges after acting on inside information to profit from the refinancing plans of Rhodia SA (Rhodia), a specialty chemicals maker.
Bacon refused to comment on the recent developments. However, in response to the Rifat arrest, the firm issued a statement stressing that the investigation of the employee does not involve any of the funds managed by Moore and that Moore is co-operating fully with the investigation. “The employee has been placed on administrative leave pending completion of the investigation,” it added.
In the CFTC case, Moore stressed that neither its principals nor its current management were involved in any improper trading, and none have been accused of any wrongdoing. It added that the firm has cooperated fully with the CFTC throughout its investigation. “We are committed to high standards of integrity in our business practices and have worked diligently to reach a settlement with the CFTC,” it added in the statement.
Stephen Taub , who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
