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Segantii - No Mandate, still Insider Trading?
The most consequential fact to emerge from the Segantii insider trading trial is not the alleged profit, HK$1.14 million, or about US$146,000, from a fund that once managed $4.8 billion, it's this: Bank of America had no mandate to work on the Esprit block trade when its equity sales trader Tony Psarianos called Segantii's Daniel La Rocca and told him the deal size (195 million shares) and the seller's identity (Lone Pine Capital, Esprit's third-largest holder at 10.06%).
Hong Kong's insider dealing offence under the Securities and Futures Ordinance requires that the person disclosing or acting on price-sensitive information be a "connected person" - someone whose professional or business relationship with the listed company gives them access to inside information. Bankers working a mandated deal: connected. A banker who has heard something, has no client relationship in place, and is ringing around before any mandate exists: considerably murkier.
If Psarianos had no mandate, he arguably had no professional relationship with Esprit or with Lone Pine at the moment he called. Which raises the question of whether he was a "connected person" at all under the SFO. Which raises the further question of whether what he passed to La Rocca was legally "inside information." Which, if the answer is no, raises the question of whether there was insider dealing at all...
The prosecution will push back hard. Their case is that the information itself, seller identity, full stake size, the fact that Lone Pine had never previously sold, was plainly price-sensitive and non-public, and that Psarianos' involvement in the deal ecosystem (Merrill Lynch did eventually arrange the sale) satisfied the "connected person" test even if the formal mandate hadn't landed yet. The SCMP reported the prosecution framing it as Sadler exploiting a "bank lapse"... BofA's unauthorized disclosure. That framing is useful for proving intent but somewhat awkward for the "connected person" argument, since conceding the disclosure was unauthorized is not the same as proving it was made by someone legally connected to the company.
The SFC has been pushing for clearer market sounding guidelines since at least 2023, and the reason they have been pushing is precisely because the line between legitimate pre-deal color from a pitching banker and an unlawful disclosure by a connected person has never been crisp. This trial may produce the definitive answer. Or the court may decide the case on narrower grounds and leave the broader question for another day. Either way, if you are a fund manager who routinely takes calls from investment banks about potential block trades, and most active managers in Hong Kong do, the outcome of this case will determine how you need to run those conversations going forward.
A More Expensive Tip
Meanwhile, in a separate and more arithmetically satisfying Hong Kong enforcement story, the SFC and ICAC's joint "Operation Fuse" from March continues to develop. Eight people were arrested, 14 locations raided, and the alleged profits were not $146,000 but HK$315 million (roughly US$40 million). The alleged method was also considerably less ambiguous: brokerage executives at Guotai Junan International and CITIC Securities (including its CLSA arm) allegedly received bribes of over HK$4 million from the owner of Infini Capital Management, a hedge fund founded by former Morgan Stanley banker Tony Chin, in exchange for advance notice of upcoming share placements in Hong Kong-listed companies. The fund then allegedly used that information to build short positions and derivatives trades before the placements caused prices to drop.
Paying someone to tell you things is different from a banker calling you uninvited. Both are under active investigation in Hong Kong. It is an interesting time to be managing a Hong Kong fund with a telephone on your desk.
White Collar Lawyers Engaging in... White Collar Crime
Over in the US, the SEC on May 6 charged 21 people with participating in a decade-long insider trading scheme orchestrated by an M&A attorney named Nicolo Nourafchan. The DOJ piled on with parallel criminal charges. The scheme ran 2018 to 2024: Nourafchan allegedly lifted confidential deal information from his law firm's client work, tipped his associate Yadgarov, Yadgarov tipped others, those others tipped more others, and eventually you have 21 defendants spread across two coasts sharing profit-split arrangements on correlated trades.
Rate of Return
The SEC also charged Reign Financial International and Berone Capital with a $26 million fraud in which investors were promised weekly returns of 75 to 125 percent. Per week.
Pop quiz - if you invest $100 in a fund that promises weekly returns of 75 percent, how much money do you have at the end of the year?
If you said "zero", you'd be right.
Shocker - the money was not invested. It went to a Rolls-Royce, private jet travel, Atlanta Hawks tickets, and jewelry.
The Banks Strike Back
Finally, private credit is having a difficult spring and Banks are seizing the moment. Bank lending rose 12.7% in Q1 2026, the fastest growth since 2022, while private credit lending fell 14%. The OCC and FDIC rescinded post-crisis leveraged lending guidance in December 2025, explicitly so banks could compete with private credit on price. Banks heard that and showed up. KKR responded by injecting $300 million into its own BDC, FS KKR Capital Corp., structured partly at NAV (showing confidence) and partly at a 42% discount to NAV (because KKR is not going to overpay for its own fund out of sentiment). Apollo is reportedly looking to sell its BDC. The (Private Credit) kids are not all right.
PE managers who have built deal financing assumptions around private credit pricing should update their models. Banks are lending again, and more cheaply.
This commentary does not constitute legal advice. All enforcement matters described involve allegations only; no findings of wrongdoing have been made by courts unless expressly stated.
