A hedge fund tied to a British billionaire who was caught on camera last year bragging about his wealth has been fined $170 million for lying to investors.
Hedge-fund manager 52-year-old Michael Platt who co-founded BlueCrest Capital Management and who is estimated to be worth $8 billion, boasted to a New York taxi driver last December, that he was ‘the highest-earning person in the world of finance.’
Platt has been facing federal charges that his fund deliberately used a computer algorithm it knew to be inferior to manage its clients’ money but then assigned a different more promising algorithm to make money for insiders.
Michael Platt is the cofounder and CEO of BlueCrest Capital Management, which he started in late 2000 after nearly a decade at JP Morgan
According to the Securities and Exchange Commission, BlueCrest made ‘material misstatements, and misleading omissions’ about how it made its calculations which it’s believed occurred when the very top talent was moved to manage employee capital beginning in 2011.
The money from clients, however, languished in BlueCrest’s flagship fund and was left to an inferior computer algorithm that generated much poorer returns than the new fund, called BSMA, the SEC alleges.
Clients soon realized what was going on and many decided to pull their cash out of the fund as word quickly spread reports the New York Post.
‘BlueCrest repeatedly failed to act in the best interests of its investors,’ the SEC’s Stephanie Avakian said in a statement. ‘Including by not disclosing that it was transferring its highest-performing traders to a fund that benefited its own personnel to the detriment of its fund investors.’
Platt’s firm has been accused of duping investors by knowingly using an algorithm which would not generate as good as returns compared to the fund’s insiders
BlueCrest is to pay $132 million to investors along with a $37 million civil penalty.
However, it neither admitted nor denied the SEC’s findings.
Platt received attention last winter after a cab ride in which he bragged about his enormous wealth as one of the highest earners in the world of finance.
In 2018, he managed to earn an estimated $1.2 billion according to Forbes while in 2019 it’s estimated he earned $2 billion.
Forbes currently estimate him to have a net worth of $8 billion.
‘The thing that’s different about me is … I’m the highest-earning person in the world of finance,’ Platt said in the video, deadpan.
‘I’m the highest-earning person in the world in finance,’ Platt repeats. ‘In the world.’
‘I’ve transformed my fund into a personal investment vehicle because we made such high returns. And now, it’s on the internet, on Forbes,’ Platt told his driver.
The video saw him sharing the cab ride with a pretty brunette woman who looked to be several years his junior.
He introduced her as ‘my girlfriend, Laetitia, the love of my life.’
Last year he was caught on video bragging about his wealth in the back of a taxi. Platt who has neither confirmed or denied the allegations was fined $170m
In New York, Platt bases himself at his 2,800-square-foot Central Park South penthouse that he bought for $11.4 million in 2013
Platt, who is divorced, later stated that the woman was simply a friend and ‘a very good person who I had been to dinner with and shared a nice bottle of wine.
‘I’m sure I’m not the only person in New York with a sense of humour after a fun night out!’ he said in a statement.
A resident of Geneva, Switzerland, Platt began to dabble in stocks as a teenager when his grandmother bought him $700 worth of shares.
He runs his BlueCrest’s operation from New York and London which he co-founded in 2000 following almost a decade at banking giant JP Morgan.
In New York, Platt bases himself at his 2,800-square-foot Central Park South penthouse that he bought for $11.4 million in 2013.
The $170m fine chump change for the billionaire who Forbes estimate to be worth $8bn
When asked about what he looked for in traders, he once said it was ‘the type of guy who gets up at seven o’clock on Sunday morning when his kids are still in bed, and logs on to a poker site so that he pick off the US drunks coming home on Saturday night’.
He added: ‘I hired a guy like that. He usually clears five or 10 grand every Sunday morning before breakfast taking out the drunks playing poker because they’re not very good at it, but their confidence has gone up a lot.’
Platt was brought up in a relatively modest household in northwest England before his hedge fund success saw him move across the globe.
His father taught civil engineering at the University of Manchester while his mother was a university administrator.
In 2010, he moved from London to Geneva, Switzerland to save on tax before reportedly relocating to Jersey while basing the hedge fund in nearby Guernsey for tax purposes.
A lover of contemporary art, the billionaire has built a sizeable personal collection while also ploughing £5million into a fund, All Visual Arts, with well-known-gallerist Joe La Placa.
Mr Platt has a private showroom in the crypt of a deconsecrated church at One Marylebone, which displays a selection of art by, among others, taxidermist Polly Morgan, pictured here
Platt also owns work by British conceptual artist Keith Tyson, pictured here
Mr Platt has a private showroom in the crypt of a deconsecrated church at One Marylebone in Central London, which displays a selection of art by, among others, taxidermist Polly Morgan, the Turner Prize-winning sculptor and installation artist Keith Tyson and Reece Jones.
The controversial collection includes a black Christ in an electric chair beside skulls, stag heads, five-billion- year-old meteorites, a Japanese girl riding a walrus and the levitation of St John the Baptist.
Skulls, crucified monkeys and stuffed sparrow heads are also among the taxidermy sculptures which are showcased in the studio.
Mr Platt has also splurged some of his wealth on a Bombardier Challenger private jet.
Platt credits his late grandmother, herself a serious equity trader, with getting him ‘addicted’ to investment.
She gave him the means to put his first wager on a little-known British shipping line named Common Brothers while he was still at school, which quickly trebled to £1,500.
After graduating at the London School of Economics, he worked his way up to become a managing director at JP Morgan before co-founding BlueCrest with William Reeves in 2000.
While Mr Reeves has since retired to Hawaii, Mr Platt oversaw a change in strategy at BlueCrest which saw the fund shut its doors to outside clients in order to focus on the wealth of partners and members.