(Bloomberg) -- BlueCrest Capital Management is suing two former traders who say they were forced to leave when the hedge fund’s billionaire owner, Michael Platt, described the equity trading business as “crap” and hinted it could close.
The traders, Alex Codrington and Russell Hartley, say they felt they had no future at the firm after an unpleasant meeting with Platt on plans for his fund’s stock trading. They allege in a Nov. 29 filing prepared for a London court case that Platt said the discussion was so depressing that he should have brought the drug Prozac.
BlueCrest is suing the pair for more than 3.5 million pounds ($4.5 million). It alleges they pledged to stay, collected bonuses and then moved to a rival fund. A lawyer for BlueCrest declined to comment on the case.
BlueCrest accuses the traders of falsely insisting they had no plans to leave before joining U.S. hedge fund Schonfeld Strategic Advisors last year. Hartley had told executive Andrew Dodd a month before their departure that the pair “had no intention to resign,” according to filing for the court case.
BlueCrest, once one of the world’s largest hedge funds, said four years ago that it was returning about $7 billion to clients to increase Platt’s autonomy. The fund manager stopped managing external money after a 15-year run in 2015 during which BlueCrest produced more than $22 billion in trading profits for investors.
Codrington and Hartley performed well between 2016 and 2017 and less well in the following year, BlueCrest said. There was therefore no further significant potential award “on the horizon,” the firm said in its filing.
Codrington and Hartley said that the stock-trading team had been slashed by 80% by the summer of 2017. BlueCrest hadn’t made any significant hires after Platt and Dodd had decided that the head of the team, Christian Dalban, “should be removed from his position,” according to the court filing by Codrington and Hartley. Dalban, who left the company in June 2017, declined to comment.
Codrington and Hartley said they “were left with the clear impression” that Platt was no longer committed to the equities unit. BlueCrest had shut down a previous equities business, the traders said.
It was at a presentation in March 2018 where the two outlined a plan to hire more junior traders when Platt hit back, they said. Platt told the two that “all equity traders are liars,” they said. While he said that BlueCrest could hire a single trader, he then became “highly agitated” when Codrington and Hartley discussed how they planned to manage market risk in the future.
After that meeting the two traders “saw no future for themselves” at BlueCrest, they said.
BlueCrest said executives had suspicions the two were planning to leave when neither responded to an email that the fund was planning to cut their allocation to an internal investment vehicle with “historically high returns.”
The two pushed to withdraw bonuses as soon as they were available, BlueCrest said, with the fund paying them 230,800 pounds in February 2018 and allocating 3.46 million pounds of deferred bonuses the following month.
(Adds information about equity trading unit in sixth paragraph)
--With assistance from Alex Verge and Peter Chapman.
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