(Bloomberg) -- Hong Kong’s securities watchdog started criminal proceedings against Segantii Capital Management Ltd. along with its founder Simon Sadler and former trader Daniel La Rocca over alleged insider dealing, marking one of the most high-profile financial prosecutions in the Asian financial hub. 

The Securities and Futures Commission alleged wrongdoing involving shares of a listed company before a 2017 block trade. Sadler and La Rocca appeared in the city’s Eastern Magistrates’ Court Thursday without making a plea, according to a statement from the regulator. The case was adjourned to June 12. 

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The allegations mark the latest regulatory trouble for Segantii, once a star hedge fund firm in Asia, often credited with helping banks pull off challenging deals. In December, South Korean regulators fined Segantii 1.48 billion won ($1.08 million) for “certain hedging trades.”

A company spokesperson said “Segantii intends to defend itself vigorously against the charge” in Hong Kong. Segantii Chief Executive Officer Kurt Ersoy declined to comment. Sadler and La Rocca didn’t immediately respond to requests for comment. 

Sadler and La Rocca were released pending the next hearing, the Hong Kong regulator said. They had to post cash bails of HK$1 million ($128,000) and HK$500,000 respectively. The SFC also required them to inform the regulator 24 hours before leaving Hong Kong and supply a full itinerary with contact details. They are required to live at home addresses provided to the SFC and alert the regulator of any changes 48 hours before moving. They are also barred from direct or indirect contact with any prosecution witnesses.

Sadler, a former trader at Dresdner Kleinwort Wasserstein and Deutsche Bank AG, founded the firm in Hong Kong in late 2007 with $26.5 million. He built Segantii into a regional giant with offices in London, New York and Dubai, trading globally with a focus on Asia-Pacific equities and equity-linked securities. Sadler later became the owner of the Blackpool Football Club in the UK. 

Fund Returns

As of March, Segantii’s 12% annualized return since its inception was more than twice that of a Eurekahedge index tracking performances of Asia-focused peers. It only recorded two moderate annual losses, in 2013 and 2023. That track record made it one of most sought-after in the region and prompted Segantii to take measures to control asset growth. 

In the first half of last year, it opened the fund for more cash to boost assets to $7 billion. However, assets of the Segantii Asia-Pacific Equity Multistrategy Fund declined to about $4.8 billion as of March, from nearly $5.9 billion a year earlier, a person familiar said, requesting not to be named because the information is private. 

La Rocca was set to join JPMorgan Chase & Co. as head of Asia-Pacific cash single stocks trading, people familiar with the matter said in February. The hiring has since fallen through, a person familiar said, without providing a reason. 

JPMorgan told hedge fund clients last week that La Rocca is not joining for personal reasons, a person with knowledge of the matter said. A representative for the New York-based bank declined to comment. 

La Rocca had been with the firm almost 10 years, but for a short stint at Evo Capital Management in 2022, according to licensing data posted on the SFC website. 

--With assistance from Gillian Tan.

(Updates with Segantii comment in fourth paragraph)

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