Citi Sues Hedge Fund Manager For Gold Loss

Jan 4 2012 | 11:13am ET

Citigroup has sued a hedge fund manager linked with 3 Degrees Asset Management over a US$1 million shortfall suffered after it liquidated his gold account.

According to the bank, Raghavendran Rajaraman used a US$20 million credit line with the bank to finance his investments in gold just as the precious metal began a precipitous decline. When gold fell by almost US$100 per ounce on Sept. 26, "the margin level under the account deteriorated to the 'forced sell' level deemed by the bank," Citi said.

So the bank sold more than half of Rajaraman's gold, and then the rest under a stop-loss order. It also liquidated another US$1.7 million in gold held as collateral.

Even after the sale, Citi was left with a loss of US$1.03 million, it said. It is seeking that amount plus interest.

Citi's Singapore unit filed the suit in the city-state in November.

Rajaraman has not formally responded to the complaint. But in an October letter to Citi, his lawyers accused Citi of breaching their agreement, leading more than US$2.7 million in losses. Rajaraman's lawyers said that Citi failed to wait 24 hours after the account reached the force-sell level as required.

A preliminary hearing is scheduled for Jan. 27.

Rajaraman, a former Citi currency options trader, works with 3 Degrees, according to the Citi lawsuit. But he is not an employee of the hedge fund, it said.

"There was a plan to launch a fund together, but it never came to fruition," 3 Degrees founder Mohamed Ibrahim told Bloomberg News.


In Depth

Malik: The Science of Deal Sourcing 201

Aug 27 2015 | 5:35pm ET

Deal sourcing is understandably a hot topic among private equity firms because it...

Lifestyle

Rolling Art Advisors Marketing Collectible Car Fund As Uncorrelated Alternative

Aug 27 2015 | 6:47pm ET

A new fund is trying to provide investors with greater access to an emerging asset...

Guest Contributor

Agecroft Partners: Hedge Fund Industry Assets to increase $250B by Summer 2016

Aug 11 2015 | 11:29am ET

Assets will continue to flow into the hedge fund industry despite long-standing...

 

Editor's Note