Investment firm tied to billionaire Michael Platt, 52 - who once bragged he was 'the highest earning person in finance' - is fined $170million for misleading investors
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 misleading to investors.
BlueCrest Capital Management was accused by the Securities and Exchange Commission of being negligent in using a separate fund to invest its own traders' money rather than its main fund which relied on an underperforming algorithm.
The algorithm, according to the SEC, underperformed by at least $25 million a month, while the company's own traders profited off a separate pot of money.
BlueCrest was co-founded by hedge-fund manager Michael Platt, 52, a billionaire worth an estimated $8 billion who was caught on camera last year boasting to a New York City taxi driver that he was 'the highest-earning person in the world of finance'.
The company, where Platt still serves as a senior executive, has neither admitted or denied the allegations stemming from October 2011 to June 2015.
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 company's top talent started work on a new proprietary fund used to manage employee capital in 2011.
As a result, the company's flagship fund where investors' money languished, was left to an underforming algorithm that failed to hit its target profits by $25 million a month on average, according to the SEC.
The algorithm failed to make sudden market moves, and did not replicate human traders' decisions because it followed their moves one day later, the SEC said.
Clients were alerted to by a due-diligence consultant alerted clients in 2014. In 2015, the firm made the decision to transition to a private investment partnership and stopped managing external money.
'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 has neither admitted nor denied the SEC's findings.
In a statement to the Wall Street Journal, BlueCrest said it was 'pleased' to have resolved the issue 'which primarily involved disclosures that were made more than five years ago'. The company said it does not relate to the way it conducts its current business operations.
BlueCrest is no longer registered as a financial adviser in the United States.
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 deadpan in the video that was filmed in the back of a taxi.
'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
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.
Platt has also splurged some of his wealth on a Bombardier Challenger private jet (file pic)
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.