Failure to Follow Investment Guidelines, Manipulative Trading and Misleading Investors Leads British FSA to Impose Steep Civil Penalties and Ban Principals of Defunct Hedge Fund Manager Mercurius Capital from Securities Industry

From July 2006 through January 2008, the manager of Cayman Islands hedge fund Mercurius International Fund Limited (Fund) repeatedly violated the Fund’s investment guidelines by over-concentrating investments in thinly-traded companies.  When the values of those investments began to drop, the Fund’s director and chief executive officer, Michiel Visser (Visser), and its chief financial and compliance officer, Oluwole Modupe Fagbulu (Fagbulu), engaged in market manipulation to inflate artificially the Fund’s net asset value (NAV), engaged in sham trades to increase NAV and conceal money borrowed at exorbitant rates and concealed all these machinations, and the Fund’s perilous financial position, from existing and prospective investors.  The Fund collapsed in January 2008 and is now in liquidation.  The British Financial Services Authority (FSA) charged Visser and Fagbulu with market manipulation and other violations of the Financial Services and Markets Act of 2000.  It banned the defendants from the securities industry and imposed steep financial penalties on them.  Visser and Fagbulu appealed to the Upper Tribunal of the British Tax and Chancery Chamber.  We summarize the Tribunal’s decision.

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