The high-profile insider-trading trial involving Segantii Capital Management wrapped up Friday in Hong Kong, as defense lawyers challenged the allegations in closing statements that the defendants acted on insider information.
The 31-day trial, which began in early May, centered on prosecution allegations that Segantii, founder Simon Sadler, and former trader Daniel La Rocca offloaded more than $1 million in Esprit Holdings shares in 2017 on confidential information – that a large shareholder was seeking to exit — received from a trader at Bank of America Corp.’s Merrill Lynch unit.
The Hong Kong District Court is aiming to deliver the verdict at a Feb. 11 hearing, Judge Josiah Lam said on Friday.
The conclusion of one of Asia’s most closely watched white-collar trials now leaves Sadler, once known as the region’s “block trade king,” awaiting his fate. If convicted, he and La Rocca could face up to seven years in prison.
Segantii announced it’s shutting down its hedge fund, which once oversaw more than $6 billion of assets, within weeks after Hong Kong’s securities watchdog filed criminal charges against the defendants in May 2024, putting more than 140 employees out of a job.
The final week of the trial, featuring closing statements from both sides, largely came down to whether the defendants could reasonably be expected to have known they were receiving and trading on insider information.
On June 14, 2017, La Rocca received a call from Tony Psarianos, then a Merrill Lynch sales trader, regarding an unidentified Esprit shareholder looking to offload more than 190 million shares.
Within minutes, La Rocca identified the seller as US hedge fund firm Lone Pine Capital, which was seeking to sell its remaining 10% stake in the Hong Kong-listed retailer — a volume exceeding 60 times the stock’s average daily trading volume at the time. Segantii sold more than a third of the Esprit shares it owned later in the day, one day before Lone Pine’s eventual block trade.
The potential price impact of selling such a large stake from a long-time shareholder would usually require equity capital markets bankers experienced in handling confidential information and “wall-crossing” clients. Wall-crossing is a compliance practice in which market participants — sometimes even public-side bank employees — agree not to trade on price-sensitive, non-public information in exchange for receiving it.
Instead, the sale was handled by the bank’s public-side sales traders, who would not typically handle such information or conduct wall-crossing.
Earlier this week, prosecution counsel Sarah Clarke said Sadler and La Rocca took advantage of Merrill Lynch’s “wholesale collective failure.” Defense counsel argued that the prosecution failed to prove information shared by Psarianos constituted insider knowledge, and that the defendants could not have anticipated that a familiar public-side sales trader would suddenly gain access to and pass on such confidential details.
Both Psarianos and his former colleague Anshul Trivedi described the bank’s actions on June 14, 2017 as exploratory, noting that they had not even obtained a mandate from Lone Pine to arrange a sale.
There was little investor appetite for the 5% maximum discount initially requested by Lone Pine, with no indication the US firm would accept a steeper markdown at the time, the defense counsel argued. They added that the eventual trade on June 15, 2017 occurred only because miscommunications between the bank’s US and Hong Kong trading desks inflated perceived demand.
Sadler founded Segantii in 2007 with just $26 million. He turned the firm into one of the first ports of call for banks trying to pull off equity sales in the region, alongside much larger global firms such as Marshall Wace and Jane Street Group.