“Although said in relation to commercial litigation, I consider that the observations of Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Ltd[2013] EWHC 3560 (Comm) , paras 15-22 have much to commend them. In particular, his statement at para 22 appears to me to be especially apt: “… the best approach for a judge to adopt … is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.””
“In this regard I would say something about the importance of contemporary documents as a means of getting at the truth, not only of what was going on, but also as to the motivation and state of mind of those concerned. That applies to documents passing between the parties, but with even greater force to a party's internal documents including emails and instant messaging. Those tend to be the documents where a witness's guard is down and their true thoughts are plain to see. Indeed, it has become a commonplace of judgments in commercial cases where there is often extensive disclosure to emphasise the importance of the contemporary documents. Although this cannot be regarded as a rule of law, those documents are generally regarded as far more reliable than the oral evidence of witnesses, still less their demeanour while giving evidence. The classic statement of Robert Goff LJ in The Ocean Frost[1985] 1 Lloyd's Rep 1 at p.57 is frequently, indeed routinely, cited: “Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth. I have been driven to the conclusion that the Judge did not pay sufficient regard to these matters in making his findings of fact in the present case.””
“I wanted to introduce you to Rob Gagliardi (Gags) “Gags” is Mr. Gagliardi’s nickname. who is one of the most experienced US/Euro capital markets PMs [portfolio managers] out there. Gags and I overlapped at Segantii while I was there … Gags is currently working for a firm called Weiss where he is running a cap markets strategy from London. I think given our growth trajectory, platform set-up, dynamic capabilities, and long term capital providers, it’s worth chatting to gags about his longer term aspirations and explore ways for us to potentially work together in the future…”
“I have made up my mind with [Weiss] and will start exploring opportunities”
“Gags got me a meeting with the global head of syndicate at MS Morgan Stanley. on Friday. I am flying to Newport Beach and meeting him in the morning. I am not even sure the guy would take a meeting with me if we called and requested so this is awesome. One strong email that is pro-Evo globally and we are in a great spot… Gags has top 5 account status with JPM, GS, and MS… Gags just wants to trade and get paid. He doesn’t care about having a fund and dealing with any of the operations/IT/management. I think this is ideal. While he is older and more senior in many ways than Toresco, he can work under the trading structure… My vision for this is we hire Gags and go global. He is based in London. He would live there for 9-15 months and build out the US business… I called Bersch at JPM to take his temperature on this and not only was he supportive he offered to do a call with Gags to let him know capital is not going to be an issue… I love this strategy and as it fits our risk taking DNA perfectly…”
“It would be difficult to get a meeting with Charles Leisure without an introduction from Mr. Gagliardi, which in itself spoke to the closeness of their relationship”
“[a]t the time I was recruited, I understood there was no large institutional money or investors who had committed money yet. A key part of the growth strategy was to get these institutional investors. Varga and Lerch had some contacts, but [ECM] needed additional checks and a portfolio manager with a ‘brand’ in the [equity capital markets] strategy, track record, and credibility – that was me…”
“1. Base commensurate with market 2. Base scale on AUM. I told him you have this 3. 17% of all New Issue PL for US 4. Discretionary bonus for business contributions, team development, and leadership and mentoring staff.”
“1. Gags joins Evo as Partner – Head of US/Europe 2. reports to Lerch 3. integrated into the team 4. base salary 250k. salary kicker of 5% of [management fees] the fund takes in 5. 17% of new issue PL in Us and Europe 6. discretionary bonus on any other trading activity. target range 10-15% of pl 7. Evo pays all other people traders back office etc. all of the above goes to gags.”
“I don’t remember us specifically talking about that”
“I just added a reference to our payroll plan and the employee NDA.”
“Your annual salary will be equal to the greater of: (i) 10% of the management fees collected in the [EARMF] or (ii)$250,000 , payable in accordance with [ECM]’s established payroll plan. Your salary will be recalculated on a quarterly basis using the preceding formula.”
“For each calendar year, provided you are an employee in good standing on each fiscal-year-end bonus payday, you may receive a discretionary bonus based on your individual performance and [ECM]’s overall performance (“Discretionary Bonus”). The target range of the Discretionary Bonus will be 10%-15% of profit of your revenue contributions but will be purely discretionary.”
“[I m]ade it 625 so it’s a clean amount.”
“1. The letter needs to accurately reflect that you’ll be providing services from the UK as well as the US so that you’re not required to relocate. 2. The term “management fees” for purposes of your salary should be defined with examples showing what the actual salary would be assuming certain AUM so it’s clear what the salary would be but also how this is calculated and reconciled quarterly. 3. The 17% payout should clarify that applies to gross proceeds (i.e. no deductions) from the business you generate, with examples/scenarios showing what you would actually receive. 4. I’m not clear on the discretionary bonus. “Profit” needs to be defined. Again, I suggest a simple example. 5. By far the most important point is that the letter needs to clarify that if your employment terminatesfor any reason, that you still get paid for the business you have generated.”
“Better if we hop on a call and I can run through the asks which are mainly clarifications.”
“This looks good to me”
“I understand that the Defendant contends that “Business” as defined in the Contract means that my Discretionary Bonus is limited to just the trading I did for the EARMF. I disagreed. The contract did not mean that I would only get paid for my performance after the EARMF was launched. If I had understood I would only be paid bonuses for the EARMF performance, I would have said, “call me when EARMF starts”
“Mr. Gagliardi’s attitude was that simply providing him with access to a Bloomberg terminal meant he had to trade.”
“limits to the amount of capital from an investment portfolio a trader can commit to a single trade. Each trader and type of trading activity has risk limits associated with them. These usually include individual position limits, overall limits for the investment strategy/portfolio and fund management limits. The individual position limits and strategy limits tend to be set internally. Fund management limits or investment parameters are usually specified in the private placement memorandum or “PPM” provided to investors. … We set internal risk limits so that any positions taken over this limit can be discussed and if considered appropriate, approved. … it would be generally unacceptable for a trader to breach their internal risk limits, and to do so repeatedly.”
“Please speak to Zoltan. Despite this disconnect out of the gate here, I think this is the best opportunity for you that exists. I think Murph would agree. The integration may take longer than you like but it will be worth the wait. I appreciate your candor and immense focus on doing things with urgency and I share that.”
“I don’t dictate the pace of the [equity capital markets]…”, “I like you Mike and we both very direct … u did tell me to get on Bloomberg and if I needed to do anything speak to Sumner.”
“Our goal is to get to 1 bil by Feb 1 and 2 in short order. In order to do that you need process. It’s a balancing act and the people like Zoltan are all about process. Zoltan is 10x more about process than me – hence having Crystal [Krystal Bojan] Ms. Krystal Bojan is married to Mr. Toresco and the head of Mr. Varga’s family office in Hong Kong. as his CFO. I’m closer to you than Rob or Zoltan but trust me on this – it is needed. I think Murph would strongly agree and I think the reason beyond you he wants to be at evo is he sees the potential to scale and that our team thinks like he does.”
“By saying that I will try not to interpret it as if you saying my process isn’t complete. I wouldn’t have gotten this strong of connectivity broadly or made p/l over years without staying in my lane and having tight process. Things don’t need to be complicated.”
“I’m not talking about your process. Your process is excellent. I am talking about the integration process.”
“Lerch, I'm sorry I am emailing you during a difficult weekend with Brent's funeral, and I wouldn't if I didn't think it was of the utmost importance. We need to be clear about what we have EXPLICITLY told Gags around his interactions with the street and trading capabilities. He traded again after market last night with MS. Morgan Stanley. MS called him late at night (head of MS ECM Pawan Passi) and said he could offer 97k shares of some name (gags doesn't remember the name), MS said its "not volatile" and "franky fu took 400k". It's supposedly around$4m of stock. Obviously the size doesn't bother me, but we need to be clear here on a few things: What has Gags been told in regards to trading? I thought we had told him to stop until he is onboarded, until he is an authorized trader, until we have a compliance process in place, has limits, has access to systems, our risk systems are updated and recalibrated, and the rest of the team understands how we are going to operate across all trading/operational verticals. I again tried to explain to him that I’m okay to miss out on opportunities until we are set up, or at least until we can all chat possibly early next week to discuss broad guidelines as to where we want to be active until we are 100% operational, but before we have the conversation with Lerch, PD, me, and the trading team, we cannot be active. He can’t understand this point. He can’t accept the fact that he is on BBG The Bloomberg trading terminal. and can’t be active. I told him that “I wasn’t wild about the fact that he advised on a trade given our conversations over the last few days”
“Let’s talk over the weekend. I think the first thing we can do is establish some limits. It doesn’t seem like there is a meeting of the minds as to how we deal with the risk during the integration. Risk limits Reporting trades Just a basic set of rules for the next month until we get the infrastructure where we need it. The bigger issue is the abusive behaviour and attitude. That obviously has to stop or we are gonna have to shut this project down.”
“I’d say that this is over a course of a week or so, so for a very short period of time, I would say that the activity was higher than I expected, but overall, I understood what the business was and how the business works and how many transactions there are”
“The main thing is to just go over the basic limits and what to do if there is a trade over the limit. These limits as you point to below are interim limits. Goal is to increase them as we improve our execution capabilities. To make this very simple: 1. SS limit of 10$ 2 . Max number of SS positions 3 3. Gross 30$ 4 . Net 20$ (ie. If he has 3 10$ positions we need a market hedge of at least 10$) 5. If he wants to trade bigger, run it by Rob and if Rob is asleep call Lerch I presume everyone is ok with me increasing the limit to say 20$ on a trade if I think the edge is there. I don’t intend to do that without understanding the trade. Anything I get involved in I will be messaging Sumner etc. in real time.”
“I guess we need to recalibrate all limits because at moment US is so much bigger than any other market and so much over the recently agreed limits. I know there were requests to increase overnight which were cleared, so for today its ok, but will work on revising into something usable and validate with Rob. On a sector and net delta basis exposure is not too large fyi. I expect that we will revise limits regularly anyway with growth of AUM, until we reach some kind of plateau, but it would be helpful for me to know if when we go really over the limit it is specific situation or more persistent trend which requires reset of limits.”
“100% agree. Gags is in the US with me for the next 3 days and I want to strongly encourage/require to stick to the limits until we are better set up. There’s edge in these trades but the potential slippage with execution may reduce the edge hence we should be smaller for now. Good to see a lot of activity but we all need to continue to communicate and stay on track with a measured increase of risk in US.”
“Partially. I think the revision---we know that the fund was in a phase where it was going to grow in AUM, so I needed both to see the level where the AUM were going to dock, and also solely integrate those traders.”
“MR JUSTICE CALVER: Is it fair to say that you knew that the risk limits were going to be exceeded for the US, but that it was anticipated that you'd get -- he'd get individual approvals for those exceeding risk limits until it plateaus out at a level which everybody can work with? A. I would rather say, my Lord, that it was that -- rather than say the approval, we would have an excess, that we would need to find the right limits that would be in place and more stable while we were in that phase of growing. It might increase for -- we would -- I would revise a few times, you know, that risk framework, until I arrived to a set of limits which are stable and don't need extension, don't need various approvals. MR JUSTICE CALVER: In that interim period, until you reach that stage, it's going to be a case of subsequently approving individual risk limits when they have been exceeded. A. Or at least escalating according to the procedure so that we would really analyse each time, you know, we are above a limit. MR JUSTICE CALVER: Yes, so if you have a group -- sorry, if you've got a group of cases where the limit has been exceeded, you might say there's an issue here, but if they're just individual ones on a few transactions, you would just look at them and approve them subsequently. A. Correct, my Lord. MR JUSTICE CALVER: Yes. MS SCHUMACHER: I think it's implicit in your answer to my Lord's question that the US positions would periodically be a lot bigger than what had been taken in respect of the Asia trading in the past; is that fair? A. It's fair to say, yes.”
“We need a limit increase in EAF”, and “We also got a limit increase in HAIN earlier”
“Can we please get a limit increase on HAIN. Currently short 150k shares, roughly$6m notional” to which Mr. Toresco responded “… I think the stock is low vol and already post earnings so I would be good up to 400k shares”; and “Can we get a limit increase on EAF, we would like to aim to be short 850k-1m shares by the close of today (roughly 13-15m notional)”
“Fine. No more than 15$ please.”
“I do not recall Lerch communicating a specific, fixed limit figure to Murphy and me. I do recall some kind of daily limit or parameters. None of [ECM]’s limits appeared to be static or fixed. Limits would change from week to week, and you could obtain a limit increase, for example by calling Lerch…”
“Risk limits overall are evolving and opportunistic. That is especially the case with the strategy Steve and I were doing, where we were managing the risk and exposure based on the opportunities that came up. We were doing negative selection, meaning we were not proactively going to put the positions on ourselves - we were taking positions from people. If a lot of people want to sell something, they were going to come looking for liquidity providers like me. We did not dictate the velocity of the market; the market dictated it. That is why there needed to be constant conversations about risk. Just like everything else that took place at Evo, the approach to risk limits seemed off the cuff. Regarding trading limits, it was a dynamic conversation and, from what I remember, it was never really set in stone.”
“When I arrived in LA, Lerch greeted me warmly and thanked me for making the trip. Lerch and I discussed the trade. This is a reference to a trade organised mid-flight with Mr. Daum of Goldman Sachs. Lerch was laughing and saying words to the effect “you’re a 24/7 guy - this is great.”
“This was done behind my back. One of the biggest insults you can deliver to a portfolio manager is to take away their discretion … Toresco’s actions had created a loss, which made my job even harder as I then had to recover that loss.”
“this is bullshit. No one has ever done this to me. You do not dictate what to do, the market does”
“With everyone across time zones and markets and not yet knowing each other well, the number one problem we need to solve for is communication. - Gags already speaks with Rob, Murph, Lerch, but more direct communication between Gags and Sumner, Aaron, Richie Mr. David Richie was an employee and trader at ECM. - New WhatsApp US risk group can be used for time-sensitive group texts and voice chats. - On an opt-in basis, we will use ejam-video-conf Slack group, where anyone live to US can please dial in whenever possible. - Larger deltas require special treatment ◦ Asia desk will communicate to US any positions over S10M and also general view of markets and large pnl days. ◦ Gags will communicate all indications and allocations above$10M (interim) to Rob, Sumner or Aaron prior to instructing an indication ◦ Murph will communicate with Rob, Aaron or Sumner prior to confirming any indication above$10M USD ◦ Murph will send email to _A1 list each day after close including all indications and new risk over SSM USD - Murph or Richie will update stock loan on any new borrows each day – - Rob will be live to US markets until 12:30/1PM EST, then either Sumner or Aaron will be live until Asia open and beyond - Openness and honesty about where our edge lies or at least some kind of edge number to articulate We all want to move fast and get this business off the ground, but we must be responsible stewards of capital.”
“In order to get him in a position to be able to trade from the UK, the fastest way is to use Mirabella. Jerry has to run point on this. I have given him all the information (attached for reference). It’s an 8 weeks process.”
“if it comes up on the call how much you are investing in the fund. your answer is 50-70% of your LIQUID net worth. i don’t think he will ask about numbers as that would be very out of bounds on a call like this”
“Firstly, to resize the risk limits for the US business, as following feedback conversations with Michael Lerch and Rob Toresco, we determined that our objectives in the US were bigger than we had initially anticipated. Secondly, I wanted to provide the EARMF with more flexibility with regards to risk, considering (i) I operated in a different time zone and was not in Asia; and (ii) I recognised that with block trades, there is a short position taken prior to an allocation of a block of stock, which allows for a risk assessment on a net basis. So I wanted our risk limits to reflect the assessment on the position as a whole.”
“Philippe [Devesa] to be the head risk manager and never once have a conversation with me about risk (not once) is appalling. Also to write emails like the [one] below Rob referenced about U.S. risk and not include me is unprofessional. I don’t like speaking thru people so any conversations about U.S. risk please speak to me directly as well. I respond much better to people that are direct. Thx Gags”
“I don’t have time for assholes like this. I have been in touch constantly with [Mr. Toresco] to put procedures and limits in place that would allow us to operate with this fast growing business in US where on multiple occasions both gags and Murphy have blatantly Ignored and showed little understanding of Risk. And when we get close to launch and put nice Procedures in place I get that. … I do not need to talk at this point to this guy.”
“Also apologies if put u in a difficult spot yesterday, I will do a call with u and Philippe his weekend or meet him in person”
“we will get there dude. just keep doing what you are doing”
“Can you send me an overnight sheet of what’s going on in asia?”, and “you also have the sheet too … so open it up”
“You seem to be missing the point. When we have bids out in stuff that is the primary consideration here. Also I was not aware that you were risk managing the fund.”
“Sumner if u talk to Steve like that again we will have a problem. That’s unacceptable, he shouldn’t be spoken to like that. He won’t be spoken to like that, he works his ass off everyday and deserves more curtesy. No days off for Steve. Be more professional, condensing email about him running risk of the fund is JV. Btw are you the risk manager ?”
“It seems we already have a problem. Please call me back.”
“Don't speak to Steve like that again. What did he do wrong? No problems from me bro I haven't heard a peep from you all summer. Steve is with me, don't attack the guy after he been working everyday. We will have a problem if you do for no reason”
“… yes I am helping to manage the fund in Rob’s absence due to the 24 hour nature of the biz and that is why my name is on the risk limits for this purpose. And the reason you “don’t hear a peep from me” is that you left our chat. In spite of that I have still sent over a few things like VIEW the other day, and then you left that chat as well. I have also tried to call you on numerous occasions and you don’t pick up. All of this is extremely unprofessional.”
“I have nothing to say to you. Nothing. I don't [want to] be in any chats on what' s app etc with anybody that isn't locked in the whole trading day of my market. Not for me. Toresco finds a way from HK. If you think I am extremely unprofessional then be a man and never speak to me again. I don't speak to people I don' t respect”
“This exchange is unacceptable. I will not put up with this type of email exchange. Sumner does help risk manage the fund as he is my 2 IC. If he makes a request (a request that I have made from the start) and Steve refuses to do it, there is a problem. We do need to learn to work together respectfully. This is not a US vs Asia business and this has been my intention from the start. I view everyone as a member of the team. EVERYONE is working their tails off since the start of this thing almost around the clock. The lack of proximity is making this very difficult to see. This is not the type of environment I want to create. Everyone is stressed at the moment as markets are very difficult. As we grow we will need to work together even closer as the business scales in complexity. Having insights from around the globe I find to be very valuable. I think that will be part of the edge going forward. If we cannot communicate different views and insights constructively it’s a waste and a real shame. We need to figure this out.”
“Steve didn’t refuse anything. Stop telling me we need to work together, I won’t accept that man it’s unfair. How many times have I vouched for you or Evo since starting. You calling me selfish ? I am not stressed. Far from it, be very careful when u say Steve refused something. He didn’t. Rob I don’t want to be lectured by you either, we speak often almost everyday. You know what I am thinking? Yes or no? Be balanced! Btw what is 2 IC ???”
“At the same time I considered whether a discretionary bonus would be payable to Mr. Gagliardi if I fired him then. My view was that no discretionary bonus would be payable because of his behaviour and attitude …I also believed that there were a litany of reasons to terminate Mr. Gagliardi for Cause (as defined in his employment contract), e.g. his threatening and bullying behaviour to other members of the ECM team. Managing Mr. Gagliardi was taking huge levels of time and energy.”
“During a management call I participated in on around23 August 2021 with Mr. Lerch and Mr. Brindle, Mr. Lerch said words to the effect “It’s not working out with Gagliardi. He’s unmanageable. He’s insane. I’ve reached my wit’s end. I can’t do this anymore. I think we’re going towards termination. Let’s figure it out. I can’t do this anymore”
“it wasn’t a threat … I was standing up for Steve, Steve was getting bullied by these guys in Asia, and I wasn’t going to have it”
“I got so angry again yesterday, I saw in PMS Portfolio Management Service. a very large delta exposure, well above all the limits I set and which they know they should clear and I sent [t]o a chat where Lerch / Sumner / rc / rob are to ask if delta correct and Lerch said yea sorry I am aware as I am with guys In NY and it's a 48 hr trade .. but of course they don't clear so it's always same for me, it happens all the time and then I have to be on those calls or committees or explain data and say we have a good process but risk limits are useless coz L[erch] approves.. the fund works well so it's ok but when I see how strict he was with me for 15 years on evofund every time small drawdown, its really frustrating So I think all I will focus on is reporting stuff coz I am wasting my time trying to do intraday risk .. they don't care and I am not part of the process clearly”
“Delta limit is 80mm, with a level 2 limit if approved of 95, and they were at 130 mm long and zero notification to risk … more than 50 pct breach .. its not really a problem if I had been in loop o would have cleared probably coz it was liquid futures delta but still … if I ever get asked if limits get breached and by how much I look stupid… Yea yesterday I did 2 committees Of ejam and had to report 46 days of value at risk excess in the quarter .. and of course I find reasons that's its ok but it puts me in annoying situations all the time”
“is that how it worked, that risk limits would be exceeded from time to time and then there would be a discussion with you or Mr. Toresco about it, and then you’d find a solution?”
“there were individual limits that may have been breached at times and permission asked for after the fact, which wasn’t the process.”
“After the meeting, Lerch told me that the meeting went well, saying, in summary, that it went great; the guys love you; and I had made Evo relevant in the US market, which they said could take years, but now Evo was in a position to be top 5. Lerch kept saying that I was elevating the Evolution brand immensely; he was proud of me and my reputation and the resources I was bringing to my colleagues.”
“Considering you were expecting it to be adult swim and very risky time I think the results are fantastic.”
“I’ve been thinking about this a lot. It’s not a simple issue. The goal is to give you the remit that allows you to do what you do in size and not have your counterparts like Passi think incorrectly about how important your role is to the mission. I’m not sure co-CIO does this. I can envision that drawing questions as well.”
“It’s very simple. Your goal and mine seem different. I told you its important to me and nothing or nobody will talk me out of it … So if u saying no, just be clear with me now pls … Then our conversation will go in a different direction.”
“I also discussed with Rob a couple of other matters. 1) no titles on business cards for anyone 2) no visits with your [equity capital market] contacts without you being there. Purpose is to avoid any confusion on the street.”
“In any hedge fund that has institutional investors, such as the two – two of the biggest on planet earth, like BlackRock and JP Morgan Asset, to put someone on the risk committee is a very big deal. You are holding out to the investors that you have complete faith in this person while they’re managing their money. So yes, it’s a big deal, and I took it as a compliment.”
“Project Gags is over”
“Subject to Devesa, the idea of spinning out Gags into a separate fund seems like a good way forward. Lots of details obviously but doing this will create a focused fund that will be a great opportunity to make $$$$ and eliminate all the friction.”
“We made a strategic hire in Rob Gagliardi in 2Q2021 to help expand our Asia focused strategy into a single global capital markets strategy. By utilising Evolution’s global capital platform, infrastructure, and risk framework we were confident we could monetize synergies across regions. Gagliardi has done a great job in helping to expand our global footprint and elevate our brand in the US and Europe. We have succeeded in both building a global brand and generating returns. More recently, Gagliardi has expressed his personal ambitions to spin out his US/Europe strategy and we plan on helping him to achieve this goal. We will also be approaching investors who may be interested in allocating to Gagliardi”
“Sure, let me digest it some more but I already have issues on how the messaging is framed and the vague wording around very important distinctions and facts. I appreciate u taking the time and effort with this however how it stands I won’t be proceeding. … Also tell Toresco I hear everything, like the call I got from MS early today about his conversation with Chapman (hire from JPM). Out of respect for you I bit my tongue and laughed to myself. Also I highly doubt you wrote this refocus piece. I have never lost focus and will be very vocal about my opinions. I won’t allow him or his wife to exaggerate anything to the market ever. Tell him to man up and give credit to you, me and Zoltan or he would still be knocking on doors in Asia”
“I did write most of it and got input from people. I thought it was a good plan. Sorry you don’t agree and have all these issues.”
“All these issues ? It’s about truth, facts and transparency I don't lie and make up shit because I don’t fear anyone or anything. I have no issues mike when people operate the same way as me. You know exactly what I mean stop coddling this kid. Since u got input from people, why don’t u get my Input and listen to the tweaks I would make?”
“I remember trying hard to get a hold of someone before the trade … I tried to call Michael [Lerch] multiple times. I also tried to contact Devesa. I couldn’t get hold of anyone at [ECM].”
“I remember Gagliardi tried to contact people to get approval for the trade, I can’t remember who, but that no one was answering the phone.”
“I spoke to him this morning for a while but he did not mention anything during the day or at any point about this…”
“Please provide colour on this ASAP. I was not notified of this nor did I approve it. Perhaps there was some communication with Toresco or Devesa but I have not seen anything.”
“The limit was ~40 mil usd and they took 60 mil usd of a position without notifying anyone on the risk committee or getting approval.”
“when put with – in front of a trade I think he wanted to do, he just didn’t call me.”
“There was no – pre-approval … A level 2 breach without pre-approval is very serious”
“Mr. Lerch called for a motion to commence de-risking EARF of its U.S. positions. Mr. Gagliardi would be given the opportunity, if he desired, to continue to pursue his U.S. trading strategy with Evolution in some standalone form where he would be the portfolio manager. Mr. Toresco seconded the motion and the Committee unanimously approved Mr. Lerch's motion. The Committee discussed winding down Mr. Gagliardi's open positions. Messrs. Toresco and Devesa indicated that the U.S. book was highly liquid and could be expeditiously unwound. Mr. Devesa said he would reach out to Mr. Gagliardi after this meeting and instruct him to not take on any new positions, other than what is required to cover outstanding commitments. He would work with Mr. Gagliardi to de-risk with the expectation of being mostly unwound by the end of the following week. Mr. Devesa would also communicate to Mr. Gagliardi that Evolution was willing to work with him on pursuing his trading strategy in a standalone structure, details to be determined.”
“Q. Earlier on, when you were giving evidence, you described the US trading as stopping, and in your witness statement, there's a slightly different phrase you used where you say: preventing Mr Gagliardi from trading. I wondered if that was an intentional choice of word that makes it look like he needed to be prevented from trading and held back from trading? A. No, there was no hidden meaning there. Q. You just meant the trading came to an end? A. Trading came to an end.”
“This is not being widely discussed internally at the moment, but we are thinking to move the Gagliardi strategy out of Evo Absolute Return Fund into a managed account or separate share class of the Evo family office fund and then into its own fund vehicle in 2022. … I think this makes our discussion with Mirabella much simpler and doesn’t draw in all the other parts of the Evo Group. It would be managed purely out of London with some legal support from Jerry in LA but everything else done locally.”
“All limit breaches are identified daily (for example a Value at Risk breach), and discussed between the responsible trader, Chief Investment Officer and Risk Management and either validated or lead to reduction/liquidation of exposure.”
“Q. Yes. It's fair to say, isn't it, that this presupposes that there will be limit breaches? This statement presupposes there will be limit breaches? A. Well, yes and no. Q. Okay. A. It supposes that if there is a limit, a position that goes over the limit, it is escalated, not that it won't -- there won't be any limit breach, which is -- maybe, my Lord, I should make a little kind of simple explanation why -- what's level 1 and level 2. MR JUSTICE CALVER: Yes. A. I think it's quite standard, you know, but you will see this concept of level 1, which is more like an alert, where I try to identify a position that is a bit larger than usual, and which is something I want to analyse; and then above that will be a level 2, which is like really something we think as a fund, we want more people to look at it and clear it. I tend to sometimes -- MR JUSTICE CALVER: What, because the breach of the limit is greater? A. Because the limit is greater. I tend to sometimes use the parallel with some -- you know, where you have a car and some alerts that tell you that you're slipping or that -- not just that you are over the speed limit, that's not the point, but some little tools that help you say what is a little bit out of the ordinary, and you need to pay attention. These are the level 1s and risk management, and sometimes with the chief risk officer, will analyse a bit. And the most important is level 2. These are more limits where we think it's really a trade that requires more validation from senior people. So that's the difference, and it's quite -- it's quite standard, and it's also something that we have in our electronic systems where there is a soft limit which alerts the trader that his trade is a little bit bigger than his normal trading, but I have defined it, just to help him know that it is a bit bigger than usual, and then there is a limit that's above, you know -- well, he can't go over, but it will pop up on the risk manager's screen for validation if necessary. MR JUSTICE CALVER: The first of those two categories, there's still a breach of the risk limits, is there? A. It's not a breach in a sense, it's a -- I find the word "breach" a bit strong, but it's just like an alert. That's why I call often the level 1 as an alert level. MR JUSTICE CALVER: But you've gone over the limit for the particular risk. A. Yes, yes. MS SCHUMACHER: When you say alert, you said alerting the trader for a bigger limit than is normal. You mean normal for the strategy in which they're trading, right? A. Yes, correct. Q. So the risk would have to be calibrated to the particular market in which the trader is trading? A. Correct. Q. Even on level 2 breaches, so number 6 that we were just looking at, that says all limit breaches, and can be discussed and either validated or lead to reduction or liquidation. That applies across the board, doesn't it? A. Correct.”
“incredible allocation on Rivian. Great work. … the allocation is sick and definitely speaks to how you manage this shit and how much partnership you have with MS etc.”
“The basic idea is that investors who redeem EARF, submit a dollar amount redemption request to MSFS Morgan Stanley Fund Services. and a subscription form for the same amount to Evo Fund A1. We are working with MSFS on the process to wire redemption cash to Evo Fund A1. Usually, this would have to go through the investor’s own account.”
“From what I remember, it was early evening when I landed in Los Angeles. Brindle went through the UK immigration line, and I went through the US immigration line. When my passport was scanned, the official said he was required to conduct a spot check on my luggage. I only had my hand luggage and the official went through my bag and sealed it. They then took me to a room close by and inside were two FBI agents. The agents said they had a subpoena for me and a search and seizure warrant for my phone […]. They also checked I had no other devices. They asked if I knew why I was there, and I said absolutely not. They said there was a block trading investigation regarding Morgan Stanley. I asked if I was under arrest and was told I was not. I said I was in a hurry to meet my colleague (Brindle) and I would not answer any questions. I provided my contact details for where I was staying and provided my phone. It was a very brief interaction. I then met Brindle outside in an Uber and said I had left my phone on the plane. I did not think I could tell Brindle what had happened because of the wording on the front of the DOJ Subpoena. I contacted an attorney that evening, who assisted me in finding a specialist lawyer.”
“Please be advised that the accompanying grand jury subpoena has been issued in connection with an official criminal investigation of a suspected felony being conducted by a federal grand jury. The Government hereby requests that you voluntarily refrain from disclosing the existence of the subpoena to any third party. While you are under no obligation to comply with our request, we are requesting you not to make any disclosure in order to preserve the confidentiality of the investigation and because disclosure of the existence of this investigation might interfere with and impede the investigation. Moreover, if you intend to disclose the existence of this subpoena to a third party, please let me know before making any such disclosure.”
“Gags was able to go through immigration as a US citizen, and I knew he had no checked bag. I was therefore expecting Gags to have got through immigration fast and that he would be waiting for me when I had collected my baggage and got to arrivals. But when I got out, I couldn’t see Gags anywhere. I looked around for him, messaged him on WhatsApp a few times and called him on his mobile phone but I got no response. My first thought was that he had got an Uber to the hotel without me and I was pretty annoyed. I called an Uber and went to wait for it outside. When the Uber was about five minutes away, I called Gags one final time, and he answered. This was maybe 25 minutes after I picked up my suitcase. Gags said he was on his way out. The Uber arrived. I got in and asked the driver to wait five minutes because my friend was on his way. We waited but Gags did not arrive. The Uber driver was getting increasingly nervous about waiting at the kerb, so I got out and let him go. I called Gags again to tell him that the Uber had gone and to ask where on earth he was. I didn’t get through a couple of times, and then he answered. I asked where he was. I think it was at this stage that Gags told me, over the telephone that he had lost his mobile phone on the plane, that someone else had also lost their phone, and that further to BA policy, they would not give Gags his phone back for 24 hours. It occurred to me sometime later that this was odd given that I was calling Gags on his mobile number and he was answering that phone, which showed it was his. But at the time, it seemed quite credible BA would not just hand over lost property without checking who it belonged to.”
“Q. Do you think at any stage you read this letter dated 15 November? A. I'm sure I read it. I don't know if I read it that night, but I'm sure I read it. Q. Because if you read on, it says: “The Government hereby requests that you voluntarily refrain from disclosing the existence of the subpoena to any third party.”
“While you are under no obligation to comply with our request, we are requesting you not to make any disclosure in order to preserve the confidentiality of the investigation and because disclosure of the existence of this investigation might interfere with and impede the investigation.”
“Moreover, if you intend to disclose the existence of this subpoena to a third party, please let me know before making any such disclosure.”
“A. I was handed a document. I took it and put it in my bag. I wasn't sitting there reading it with him. … Q. Now, when did you first read that document? A. When I got back to Shutters, I actually read through the first three or four pages, and then I called my lawyer. … Q. Let me ask the question again. Try and see if you can answer it. Did you believe you could not tell anybody because of what the FBI agents had said to you, or because of what it says in that letter? A. Both. Q. So you must have read the letter when you were at the airport? A. But on all of the pages, if I remember correctly, it does say "confidential", ‘confidential’.”
“I was sitting in the hotel courtyard with Lerch and Chisholm. Chisholm said words to the effect “I spoke to Fischer, he told me about the subpoena.”
“hey, you know that phone that I lost, I didn’t lose it, it was confiscated by US Marshalls. This is nothing, I’m just caught up in some market thing. I didn’t do anything wrong, I just needed to talk to my lawyer which is why I delayed in telling you, and yeah this is nothing.”
“As Lerch has discussed with you, Lerch redeemed$20 mm from the EARF fund in order to seed a potential launching of a fund managed by Robert Gagliardi. For the purposes of the side-letter, I just wanted to memorialize that fact (i.e., we are required to give JPM notice of any redemptions).”
“After a lot of deliberation with Adrian and Richard, unfortunately it’s not going to work to put IPO trades in EARF. A1 is not ready either. We don’t have any more options here so have to be on pause for the moment.”
“I appreciate the continuing support to set up the new fund as soon as practical in 2022 and the guidance on messaging you gave to Murph. Re 2021, since it is clear that we are done trading, and the numbers are set, can you please authorize payment of my performance comp before the close of the year?”
“The enclosed subpoena requires your client to produce documents to the SEC by January 26, 2022”, and those documents to be produced were documents concerning Mr. Gagliardi’s trading. It triggered obligations on ECM to inform some investors that ECM had entered into non-standard communications with the SEC, and provided a list of documents to be produced, which included: “1. Robert Gagliardi’s personnel file. 2. Al Documents, including presentations, furnished by Robert Gagliardi during the hiring process. 3. An electronic trade blotter for all trades in all securities, including stock and/or options and derivatives, including total return swaps, by Evolution in portfolios where Robert Gagliardi made investment decisions or had trading authority. Please include time-stamped order entry and execution detail for all trades in a structured format… 4. All Documents Concerning any compliance or risk reviews Concerning Robert Gagliardi. [5-9. All Communications between Robert Gagliardi and Pawan Passi; Charlies Leisure; Felipe Portillo; Michael Daum; and Anthony Kontoloen, respectively.] 10. All Documents Concerning the Firm’s investment in block trades, secondary offerings, and unregistered secondary distributions between February 2021 and the present. 11. All written supervisory procedures Concerning insider trading. 12. All written supervisory procedures Concerning Rule 105 of Regulation M. 13. All written supervisory procedures Concerning investing in block trades secondary offerings, and unregistered secondary distributions. 14. Documents sufficient to identify the Firm’s policy Concerning the use of personal devices to conduct Firm business.”
“The SEC and DOJ investigations concerned one of the largest markets in the world and the most powerful people in that market, such as Mr. Passi.”
“… Re 2021, since it is clear that we are done trading, and the numbers are set, can you please authorize payment of my performance comp before the close of the year?”
“Michael Lerch: 37. So, you know, if it had been a normal year, okay, like a normal situation where we have an ongoing situation and everything is normal, we don't like have these issues that we're having ... but again, I don't think our, our you know issues they won't be resolved. But in the absence of having any issues and the firm doing well and the business doing well and the rest of the business doing well, you know, I put in there a discretionary bonus and I gave the range of 10 to 15% of the P&L. Now, under the circumstances ... if you just look at 10 to 15% of that, it's 2.8 million versus whatever, you know, four million or something like that. That would be additional bonus that you would get if I said, "Okay, well, all those factors, you know, were the way they were." 38. And my position right now is I don't know what the ... I'm not going to make ... if I have to make a decision right here today on whether or not the other factors would be detrimental in a material way to there being a discretionary bonus, if I have to be forced to do that, versus saying, "Everything is fine. This is awesome," I would say that you would be forcing me into a position, taking a conservative position, on that, which would be that things are not fine. This is not what, you know, was ... the reason why this was discretionary was to account for this very situation that we're dealing with and as a result of that, that discretionary amount is zero, okay?” 39. Do I think I want it to be that way? No. But I'm not in a position right now to get into what that number's going to be and then there's also the factor of Murph. You know, if I'm bearing the Murph cost in its entirety, okay, that that definitely has an impact on this. So I mean, what I would propose on the Murph front is I pay you six million at the end of January. I pay him a half a million as a, a bonus and then there's another amount that would be considered down the road for both you and him if, at 100% of my discretion, things move in the right way. That's, that's where I am right now as far as the way I'm thinking about it… 40. But I think the numbers are firm and if there was 63 million bucks of P&L in change, non-lPO around 28, IPO of 35. And that's kind of the way l'm ... and again, I want to ... my view is I'd like to move in a direction with things where we have a chance to, have a chance to make some money off of all the work that I've done in our relationship, in our friendship. And that would be getting to invest in what you're doing. I'd like to have an arrangement where I get some kind of capacity to invest in what you're doing, on full fees like anyone else you would bring in but the opportunity to be a participant in it is important to me and, you know, that's kind of like the general situation that I think, if I could describe it right now, that's, that's where I'm at.” 50. I’m saying that, like there’s a very discretionary balancing out of various issues when it comes to discretionary bonuses… 70. I can’t predict where this goes.”
“… I’d like to move in a direction with things where we have a chance to, have a chance to make some money off of all the work that I’ve done in our relationship, in our friendship. And that would be getting to invest in what you’re doing. I’d like to have an arrangement where I get some kind of capacity to invest in what you’re doing, on full fees like anyone else you would bring in but the opportunity to be a participant in it is important to me … I mean, I would like to have the right to invest up to 50 million bucks in what you’re doing.”
“I attach an MOU for the go forward. I thought it would be good to put our discussions in form. I had a positive chat with Murphy as well on getting things up and running. Please review and we can do a call.”
“RECITALS WHEREAS, the Employee wishes to launch a fund to pursue his capital markets strategy (the “Fund’’) and [ECM] fully understands and supports that decision; WHEREAS, the Parties have discussed that it may make more sense for the Employee to launch the Fund either on his own or through another investment advisor complex; WHEREAS, the Parties want to set forth some high-level terms for what the Fund launch would look like and define the Parties’ relationship going forward; NOW, THEREFORE, in exchange for the good and valuable consideration set forth herein, the adequacy of which is specifically acknowledged, the Parties hereby agree as follows: AGREEMENT 1. Capacity in the Fund.The Employee hereby agrees to give [ECM] and its affiliates up to$50,000,000 in investment capacity in the new Fund. [[ECM] agrees that the investment will be subject to the same fees that other institutional investments are paying.] 2. Staffing for the Fund. [ECM] agrees that the Employee may solicit and employ any of the employees of the Company either as full-time employees or as independent contractors to the extent such employees are amenable to the terms. It is also contemplated that Steven Murphy (“Murphy”) would terminate his employment with the Company in order to assist the Employee with the Fund. 3. Employment Relationship. As the Parties contemplate that the Employee will launch the Fund either on his own or at another investment advisor, the Parties would agree to terminate the employment relationship pursuant to standard and ordinary documentation (“Document”). The Document would reflect the payment of the new issue bonus of$6,000,000 and the salary through the termination date and would include mutual releases. The Document would also reflect that a discretionary bonus may be paid in the future at [ECM]’s sole and absolute discretion.”
“I had never seen an MOU before, but I understood that if I signed the MOU I would waive my right to my discretionary bonus. I didn’t sign it and I recall saying to Lerch “I’m not waiving my bonus.””
“I recall that Lerch said the MOU was “take it or leave it.”
“Under my contract, I should have been paid the IPO portion of my compensation yesterday, but I did not receive anything. When I asked Adrian about this earlier today, he explained that he had been told to withhold this payment until I signed a separation agreement. While I am happy to continue to explore different working scenarios, I expect Evo to honor its contract with me as a basis for continuing these discussions. I believe my performance speaks for itself and I shouldn’t have to negotiate to receive what I’ve already earned. By holding up payments, you are putting me, and others like Murphy, in a very uncomfortable position. Please let me know what your intentions are with respect to the payments that were due by 1/31.”
“Given the current intense press scrutiny, Rob [Gagliardi]'s sudden separation will almost certainly lead to negative coverage and defamatory inferences. There are a number of ways we can maintain the status quo while discussing the MOU and related issues in good faith -- and do so quickly. To do otherwise virtually guarantees a number of unintended, adverse consequences including serious reputational damage to Rob (and probably Evo). Evo can avoid causing this damage by continuing our discussions for a short period of time and I ask you to consider doing so.”
“We can continue to negotiate points of the MOU (i.e. capacity) after the termination of Rob’s employment.”
“People will see he’s off Bloomberg, so it will get out and probably picked up by the press, drawing attention to him and [ECM].”
“He got a signed bonus, he got a high salary, he got a bonus contractor for his IPO, you know, and the rest of his bonus is discretionary. I told him two months ago that "under the circumstances, if you want to force me to make a decision about that today your discretionary bonus is zero because of a litany of issues that we have had. I do not want to go into them but if you are going to push me on this then the number is zero and if you want to just move on in a collaborative way we can discuss something more than zero at some point in time but this is a pretty serious fucking situation we are in". I mean, I do not know any person on the planet that would deal with this any differently than me. Like, it is -- you know.”
“The call then shifted to EARF. They would like to delay the investment until some of the dust settles around the [SEC/DOJ] investigation. He proposed a re-visit in June for a July investment. I did explain how our [internal] investigation did not result in any adverse findings and that Gags is no longer associated with Evo. He gets it. But I also understand their position. No huge downside to waiting.”
“As I know we have discussed recently, our investment committee is concerned about the recent press and SEC/DOJ scrutiny surrounding the ECM/block trading business. While discussing the topic over the last couple of months, we have halted any new flows into EARF. We want to find a way to continue growing our exposure to the fund. To that end, we have been discussing different ways to mitigate the risk to our clients and have come up with a couple of ideas/requests that I wanted to run by you. Our IC [investment committee] has agreed that we will be able to “unfreeze”
“I have seen an email from Adrian to me dated March 15, 2022, attaching a spreadsheet which sets out the bonus position as at that date.”
“With respect to the investments in the Manager Funds by JPMAAM Investors, the Manager agrees that the manager and not the JPMAAM Investors will bear any portion of any potential fine (including disgorgement of profits) imposed on the Manager or the Manager Funds by reason of the 2021 block trading inquiry and any related equity market investigations that otherwise would have been allocated, directly or indirectly to the JPMAAM Investors.”
“In 2022 and early 2023, BlackRock was among the investors who made frequent enquiries of the Evo Group regarding the status of the SEC and DOJ investigations. These investigations put a strain on Evolution’s relationship with BlackRock, particularly given that they had questioned Mr. Gagliardi’s involvement in ECM from as early as May 2021 (referred to in paragraphs 6.2 and 6.3 above). Ultimately, in late June 2023, I was informed on a phone call by my operational due diligence contact at BlackRock that they would be submitting a full redemption for all of their investments. I recall this conversation well, as I was at dinner with Mr. Brindle and Mr. Devesa in London when I received the call. They explicitly noted their concerns regarding the SEC and DOJ investigations into Mr. Gagliardi and Evo Group. Evo Group has had no dealing with BlackRock since the redemptions were processed. In the summer of 2023, the relationship between Goldman Sachs and Morgan Stanley and Evo Group also ended. Evo Group had had a long standing relationship with Goldman Sachs which had been our first prime broker when Mr. Lerch first founded the business. Following this, in August 2023, following conversations with Mr. Brindle and me, Mr. Lerch made the decision to shut down the EARF due to the redemptions made by investors and the termination of the administration agreement and the prime brokerage agreement with Morgan Stanley. We returned all outside capital to investors at the end of September 2023. This was effectively the end of the Evo Group’s external fund management business.”
“The EARMF earned$49,999,030 in net income after incentive fees, of which almost 100% was attributed to Gagliardi’s individual performance. Based on the examples in Gagliardi’s Agreement, the target range for his Discretionary Bonus was 10%-15% of this amount, or approximately$5 million to$7.5 million . Given Gagliardi’s revenue and related contributions, ECM had no discretion not to pay him at the top of this range.”
“Can you send a [response] to the L2 Level 2. risk breach and say you spoke to me and approve. PD gave me approval so I went over but he said I shouldn’t have without your pre approval. … I need you to document on email.”
“i am pissed off with this breach, because that means that for the next year or 2 years, when regulators ask "have limits been breached", you always have to go and get those specific days and show what you did etc.. so unnecessary. they have been using 20% of limits for 6M, and they start getting some risk (long delta), and i have alert levels where if you breach its still ok, and we did that last week, and we have been very clear about fact that the next trigger needs pre-approval, but they don’t do it.”
“Please provide an update of any regulatory visits or communication in the past 12 months. Highlight any matters raised by the regulator(s) (where applicable) and what actions were taken to resolve these issues”
“I think it may have”, and “Likely, yes”
“It is difficult to imagine how the Staff [of the SEC] will be able to establish that Mr. Gagliardi participated in a scheme to defraud when the Staff: (1) has conceded that Mr. Gagliardi did not make and was not aware of any misrepresentations, and that there are no misrepresentations relevant to Mr. Gagliardi; (2) was unable to articulate who Mr. Gagliardi has allegedly defrauded; (3) did not explain how any purported victim was allegedly harmed; and (4) has not articulated any facts suggesting that Mr. Gagliardi engaged in the classic deceptive conduct courts have held is necessary to establish his participation in a scheme to defraud.”
“Mr. Gagliardi did not understand that any information he received from banks was being provided to him in violation of a duty of confidentiality owed by the bank to the selling shareholder. To the contrary, the banks each had their own policies and procedures designed to ensure that they refrain from providing Mr. Gagliardi with any information about a block that was not appropriate to be shared. Mr. Gagliardi—who never had any contact with selling shareholders of blocks—reasonably and rightfully believed that if a bank spoke with him about a block without a wall-cross in place, the bank was permitted to share the information.”
“We have concluded the investigation as to your client, Mr. Robert Gagliardi. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Mr. Gagliardi. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation.”
“Whilst Delaware law does not use the same language of “factual matrix” as English law, it is a necessary corollary of ascertaining the common meaning of the contract from the perspective of the reasonable person in the position of either party that this includes the objectively ascertainable factual matrix.”
“While we have recognized that contracts should be “read in full and situated in the commercial context between the parties,” the background facts cannot be used to alter the language chosen by the parties within the four corners of their agreement. It is only when an ambiguity exists that the court should resort to extrinsic evidence to discern the parties’ intent. Contractual language “is not rendered ambiguous simply because the parties in litigation differ concerning its meaning.” “Where no ambiguity exists, the contract will be interpreted according to the ‘ordinary and usual meaning’ of its terms.”
“… the Discretionary Bonus payable to you in 2022 for your contributions in 2021…”
“For each calendar year, provided you are an employee in good standing on each fiscal-year-end bonus payday, you may receive a discretionary bonus based on your individual performance and the Profit generated from the Business (the “Discretionary Bonus”). “Profit” refers to the profit to the Company [the Defendant] and its affiliates attributable to the Business, net of all expenses including but not limited to overhead, operating, administrative, legal, compliance, and accounting expenses allocable to the Business, salaries and benefits of employees supporting the Business, and fund expenses borne by the Company and its affiliates, such as expenses related to investments and hedging, research, market data and Bloomberg terminal fees, reasonable and documented travel expenses, legal, accounting, taxes, external valuation and audit expenses, brokerage commissions, continuing offering and operating expenses (including, without limitation, administrative fees), and extraordinary expenses, such as any litigation costs.”
“net of all expenses including but not limited to overhead, operating, administrative, legal, compliance, and accounting expenses allocable to the Business, salaries and benefits of employees supporting the Business, and fund expenses borne by the Company and its affiliates”
“For each calendar year, provided you are an employee in good standing on each fiscal year-end bonus payday, you may receive a discretionary bonus based on your individual performance and the Company's overall performance (“Discretionary Bonus”). The target range of the Discretionary Bonus will be 10-15% of profit of your revenue contributions but will be purely discretionary.”
“1. … 2. … 3. The 17% payout should clarify that [it] applies to gross proceeds (i.e. no deductions) from the business you generate, with examples/scenarios showing what you would actually receive. 4. I’m not clear on the discretionary bonus. “Profit” needs to be defined. Again I suggest a simple example. 5. By far the most important point is that the letter needs to clarify that if your employment terminates for any reason, that you still get paid for the business you have generated”
“[4/9/21, 7:24:20 Lerch Whatsapp: So meeting with MS ECM was extremely straight forward. Very validating of Gags. That’s MS Morgan Stanley. and GS Goldman Sachs. that put him in the top 5 people they deal with. Noted that so long as we have a good relationship with MS, the shows follow Gags. Since we do, I’m very excited about this. [4/9/21, 7:26:51] Richard Chisholm: Excellent. Great to hear. What kind of package is he expecting? We have 50 percent of performance fee going to Rob. Do we revisit that so he gets 50 percent of his pnl? Does Gags expect a fixed percentage of performance fee? [4/9/21, 7:27:45] Lerch Whatsapp: We are going to have to get creative.” [4/9/21, 7:27:45] Lerch Whatsapp: We are going to have to get creative.”
“we aim to move A1 to EARF on 1 June”
“Please find attached the track record for the fund in which [Mr. Gagliardi] managed the US and European capital markets strategy. The fund’s name is Evo Absolute Return Master Fund. The fund started as a share class of an existing vehicle in October 2020 and was spun out into its own fund entity on1 August 2021 . …”
“Evo Absolute Return Fund (the "Fund") was incorporated in the Cayman Islands as an exempted company on January 15, 2021. The capital of the Fund is invested through a "master-feeder" structure in Evo Absolute Return Master Fund (the "Master Fund"), an exempted company incorporated under the laws of the Cayman Islands on March 17, 2021. Evo Absolute Return Fund LLC, a Delaware limited liability company, is available for United States ("U.S .") investors and also invests through the Master Fund. On or about August 1, 2021, the portfolio attributable to the Class Al Shares of Evo Fund, a Cayman Islands exempted company ("Evo Fund"), managed by the Investment Managers, was contributed to the Master Fund, by way of a redemption in kind of the shareholders of the Class A 1 Shares of Evo Fund, and a subsequent contribution in kind to the relevant feeder fund of the Master Fund. As a result, the portfolio attributable to the Class Al Shares of Evo Fund is now held by the Master Fund.”
“Please find attached the track record for the fund in which Robert managed the us and European capital markets strategy. The fund's name is Evo Absolute Return Master Fund. The fund started as a share class of an existing vehicle in October 2020 and was spun out into its own fund entity on1 August 2021 . The first tab is the track record of the full fund for a New Issue eligible investor and includes all strategies. Robert commenced his strategy in May 2021 and the second tab shows the gross PL of all the block and IPOs in 2021.”
“When Gags joined ECM, the EARMF was not in a position to start trading. For example, we did not yet have prime brokerage agreements in place. So, at first, Gags traded for the Evo Fund Class A1 shares. Rob Toresco was the ultimate decision-maker for trades made for the Class A1 shares, and he was always going to be the CIO for the EARMF. My initial focus was to get Gags up and running as soon as possible. This included sorting out his connectivity to the ECM systems and to Bloomberg, which allowed him to see trading information, and sorting out the lease for the office, and sorting out the furniture.”
“Alternatively, the Defendant is estopped from contending to the contrary, whether under Delaware or English law, by equitable, promissory and/or quasi estoppel (under Delaware law) and/or by representation and/or convention (under English law), and in each case if and insofar as necessary: i. an estoppel will arise under Delaware law: (1) by way of equitable estoppel, when, by conduct, a party intentionally or unintentionally leads another, in reliance on that conduct, to change position to his detriment; (2) by way of promissory estoppel, where there is a promise and reliance thereon; and (3) by way of quasi estoppel, to preclude a party from asserting, to another’s disadvantage, a right inconsistent with a position it has previously taken; ii. each such estoppel arises here: (1) the Defendant having promised and represented to the Claimant in particular through Mr Lerch that he would be paid by reference to his financial contribution, including IPOs and block trading, intending that the Claimant should rely on that representation; (2) the Defendant having calculated and paid the Claimant’s base salary and New Issue Bonus by reference to his financial contribution; and (3) the Claimant having changed his position in reliance, by joining and/or remaining in the Defendant’s employment rather than seeking alternative work, and would suffer detriment if the Defendant were permitted to resile…”
“Rather, “[t]o constitute this sort of estoppel the act of the party against whom estoppel is sought must have gained some advantage for himself or produced some disadvantage to another.’”
“Q. But there wasn't any discussion with Mr Gagliardi at any point in time saying that: as a result of these tensions, any disagreements, you're at risk of not getting a bonus. There was no discussion like that at any time, was there, Mr Lerch? A. We never talked about that.”
“I wasn’t, because if they were serious about them, they would have stopped me trading and making money for them. They were just concerned about me trading and continuing to make money for them.”
“I believe nothing was ever said to me. Their behaviour suggested they were fine with everything.”
“Further and in any event any fine payable by [ECM] arising from [Mr. Gagliardi’s] activities while employed by [ECM] would be a legitimate consideration in determining any discretionary bonus. This factor is not yet known and is a further reason why a discretionary bonus could rationally not be paid at this stage.”
“(i) [Mr. Gagliardi] was subject to a criminal investigation by the DOJ in respect of the type of trading he had been doing with us. The SEC subpoena to which we were subject suggested that there may well be a regulatory problem not just with his trading at previous firms, but also with us. The DOJ/SEC investigation relating to Mr Gagliardi’s conduct created a great deal of uncertainty for ECM and the Evo Group. No one knew what the outcome of the investigation would be. It put in jeopardy the business we had built over several years and put the livelihoods of those at ECM at risk. At that stage, there was a real prospect that any publicity about the investigation could damage ECM’s reputation in any event, no matter what the outcome. It also had the potential to negatively impact our relationships with investors. This subsequently did happen, for example, JP Morgan sought an indemnity from us in respect of this investigation. (j) We were having to incur substantial legal costs to deal with the SEC investigation as well as paying Mr Gagliardi’s legal costs for dealing with the DOJ investigation.”
“In January of 2022, the firm received a subpoena from the United States Securities and Exchange Commission (“SEC”) requesting trading information and other materials related to block trades conducted for certain client accounts. This was in connection with a broader market-wide inquiry into block trades… We produced the information requested by the SEC in February 2022. There has been no further written communication from the SEC. After conducting an internal examination, we do not believe there has been any wrongdoing committed by the firm or its personnel...”
“We have concluded the investigation as to your client, Mr. Robert Gagliardi. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Mr. Gagliardi. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation.”
“You were content, were you not, to make very serious allegations against Mr. Gagliardi, without any proper basis for doing so in that litigation?” to which Mr. Chisholm responded: “I disagree with that characterisation, my Lord. I think every statement I made in that complaint was justified and factually backed up.”
“[Mr.] Gagliardi’s failure to disclose prior Rule 105 trading violations before he was hired by ECM constitute “Cause” under the Agreement, and thereby breached the Agreement.”
“Rule 105 is the very same regulation that ECM subsequently learned was the subject of a successful enforcement action taken against the firm that employed Gagliardi before he was hired by ECM. When ECM made Gagliardi an offer of employment, it was unaware of these non-public violations involving trades that it now believes were directed by Gagliardi.”
“It does appear that way, yes.”
“It's certainly -- the time period overlaps with Mr Gagliardi's time there, so certainly he was involved, but it does say that compliance was at fault there”
“First, if it is found that the destruction of the evidence was carried out deliberately so to as hinder the proof of the plaintiff’s claim, then such finding will obviously reflect on the credibility of the destroyer. In such circumstances it would enable the court to disregard the evidence of the destroyer in the application of the principle… “Second, if the court has difficulty in deciding which party’s evidence to accept, then it would be legitimate to resolve that doubt by the application of the presumption. But, thirdly, if the judge forms a clear view, having borne in mind all the difficulties which may arise from the unavailability of material documents, as to which side is telling the truth, I do not accept that the application of the presumption can require the judge to accept evidence he does not believe or to reject evidence he finds to be truthful.”
“Parties say they will ask the judge to draw adverse inferences in many circumstances where such a conclusion would be entirely unjustified. Too often the use of the expression is meaningless and is simply used as a substitute for “we will ask the judge to reject your case.””
“I have not further deducted the discretionary bonuses paid to others in arriving at “Profit.”
“Hedge fund investors who received confidential information from the Head of the Desk and Employee-1 about upcoming blocks recognized that this information allowed them to profit in ways they otherwise would not have. For example, an investor working at a Nevada-based hedge fund (“Investor-3”) told the Head of the Desk in an August 2021 call, “I know who my daddy is,” referring to the assistance that the Head of the Desk had provided Investor-3 in profiting from block trades. Investor-3 stated in the same call, again referring to block trades, that the Head of the Desk had “put [3] in the fucking game,” and that Investor-3 “would be at the kiddie table if it wasn’t for” the Head of the Desk.”
“To take one example of a Relevant Block, on June 20, 2018, a representative of a block seller of 10 million shares of Canada Goose (“GOOS”) called a member of the Desk shortly before 2 p.m., then sent a BWIC Email to the Desk at 2:01 p.m. stating, “By opening these documents you agree to treat them as highly confidential, and neither their contents nor the existence of this potential transaction will be shared or discussed with anyone outside your firm.”
“36. During the Relevant Period, Passi disclosed non-public, potentially market-moving information received from selling shareholders or their agents about block trades to certain potential purchasers of the block, including a portfolio manager ("Portfolio Manager A") in the London, England office a Hong-Kong-based hedge fund ("Hedge Fund A") while the auction process was ongoing. Passi knew, or was reckless in not knowing, that such disclosures violated the terms of the auctions and the BWIC emails the Syndicate Desk received in which selling shareholders or their agents expressly requested confidentiality, representations of confidentiality made by the Syndicate Desk, and/or Morgan Stanley's policies on the treatment of Confidential Information. 37. Passi provided this information to Portfolio Manager A with the understanding that he would take large short positions in the stock in anticipation, and prior to the execution, of the block trade, and that, if Morgan Stanley won the auction, Portfolio Manager A would request and receive allocations from the block trade to cover those short positions. 38. Passi knew that providing information about block trades to buy-side investors, such as Portfolio Manager A, could cause the stock price to decline if those investors sold significant amounts of stock in advance of the block trade. 39. Portfolio Manager A's pre-positioning activities benefitted Morgan Stanley as they ensured that there would be a large buyer for at least a portion of the block trade, thereby lowering Morgan Stanley's risk on the transaction, and giving the firm comfort to offer a tighter and more competitive bid. 40. Most selling shareholders and their agents would not have included Morgan Stanley in the auction process involving BWICs if they knew or suspected Passi was disclosing information to buy-side investors during the auction process.”
“41. On May 2, 2018, a United Kingdom-based private equity firm ("Selling Shareholder A") sold 3 million shares of Medpace Holdings Inc. ("Medpace") common stock ("MEDP") through a block trade with a New York investment bank ("Investment Bank A") serving as the underwriter. That block trade included a 45- day lockup on Selling Shareholder A, which precluded it from selling additional shares until June 16, 2018 unless Investment Bank A released the lockup early. 42. As the expiration of the lock-up period approached and before Morgan Stanley received a BWIC, Passi had discussed a potential MEDP block with Portfolio Manager A. For example, in a telephone conversation with Portfolio Manager A on June 8, 2018, Passi conveyed, based on a conversation that a different Morgan Stanley employee had with Selling Shareholder A, that Shareholder A "want[ed] to go" (i.e., sell another block of MEDP). On that call, Passi asked how big of an allocation Portfolio Manager A wanted in a potential MEDP block trade and suggested 500,000 shares. Portfolio Manager A responded that he would be interested in purchasing a minimum of 250,000 shares and maybe more. Additionally, as late as 10:38 am ET on June 11, 2018, the same day that Morgan Stanley received a BWIC, Passi informed Portfolio Manager A of his view that Selling Shareholder A couldn't sell a MEDP block until the following week because the lockup was still in effect. … 47. At 1:12 pm ET on June 11, 2018, Portfolio Manager A called Passi for approximately nine minutes. During that call, they discussed the impending MEDP block trade. 48. At 1:17 pm ET, while Portfolio Manager A's phone call with Passi was ongoing, Hedge Fund A resumed shorting MEDP shares. Between 1:17 pm ET and 3:59 pm ET, Hedge Fund A synthetically sold short 87,000 shares or approximately$3.8 million of MEDP using equity swaps. During that same time period, the price of MEDP declined from$43.79 to close at$43.39 . Hedge Fund A's trading during that time period represented 88.9% of the trading in MEDP. … 50. Hedge Fund A received an allocation of 350,000 MEDP shares from Morgan Stanley, more than 11% of the shares in the block trade, at$42.25 . Morgan Stanley generated approximately$1.88 million in profits from this MEDP block trade.”
“65. At 1:35 pm ET on March 19, 2019, a Senior Managing Director at Selling Shareholder B sent Passi and other Morgan Stanley employees a BWIC email. The email began "Passi — As we just discussed, we appreciate your protecting the confidentiality of this discussion from the marketplace, as well as your consideration and thoughts." It continued by asking for Morgan Stanley to submit bids on a block trade of two different sizes: 36 million shares and 43 million shares. 66. Also at 1:35 pm ET on March 19, 2019, Passi called Portfolio Manager A for less than one minute. Portfolio Manager A called Passi back at 1:35 pm ET, and that call lasted for approximately four minutes. During that call, they discussed the impending INVH block trade. 67. Between 2:10 pm ET and 4:03 pm ET, Hedge Fund A synthetically sold short 950,000 shares or approximately$22.2 million of INVH using equity swaps, representing 45.6% of the total volume traded during that period. INVH closed at$23.30 , down$0.30 , or 1.3%, from its price at 2:10 pm ET. 68. At 4:18 pm ET, Morgan Stanley submitted a bid of$23.22 for 43 million shares, which was accepted by Selling Shareholder B. 69. Hedge Fund A was allocated 2.5 million INVH shares from Morgan Stanley, approximately 5.8% of the block trade, at a total cost of$58.25 million . Morgan Stanley generated approximately$3.4 million in profits from this block trade.”
“The impression given by the statements made in [the extracts]of the DOJ Statement of Facts and the SEC Passi Order was that the Claimant (referred to as Investor 3 and Portfolio Manager A) was engaged in regular conduct during the SEC/DOJ Relevant Period which was or which involved at the very least using confidential information to enter trades and thus generate profits so as to give him an unfair advantage over other market participants.”
“In the premises [Mr. Gagliardi] was in breach of the Trust and Confidence Term as follows: a. Failing to disclose to [ECM] at the start of his employment or at any time subsequently that his relationship with Mr Passi was or had been inappropriate in that he had habitually received from Mr Passi confidential information for the purposes of entering trades and generating profits which he would not otherwise have been able to do. b. Maintaining a relationship with Mr Passi, when [Mr. Gagliardi] was employed by [ECM], in circumstances where he had previously received confidential information from Mr Passi, for the purposes of entering trades and generating profits which he would not otherwise have been able to do. This was also inappropriate given that [Mr. Gagliardi]’s relationships with key individuals at investment banks, including Mr Passi at Morgan Stanley, was central to his role at and employment with [ECM]; and where any association between [ECM] and Mr Passi, and/or anyone else who had engaged in conduct that was disreputable and/or which was or which might reasonably be believed or suspected as a breach or potential breach of SEC Rule 10b-5, posed a serious regulatory and reputational risk to [ECM].”
“This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the Court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the Court to infer dishonesty from facts that have not been pleaded, or from facts which have been pleaded but are consistent with honesty. … This is a case of inference, and inference from disreputable conduct. The primary facts relied on must be alleged. That means in the present case the claimant will be confined to its pleading, and it is legitimate to scrutinise its pleaded case with care.”
“…the basic rule is that, before a person is to be bound by a judgment of a court, fairness requires that he should be joined as a party in the proceedings, and so have the procedural protections that carries with it. This includes the opportunity to call any evidence he can to defend himself, to challenge any evidence called by the claimant and to make any submissions of law he thinks may assist his case. Although there are examples of cases in which a person may be found to be bound by the judgment of a court in litigation in relation to which he stood by without intervening, in my judgment those cases are illustrations of a very narrow exception to the general rule. The importance of the general rule and fundamental importance of the principle of fair treatment to which it gives expression indicate the narrowness of the exception to that rule.”
“a. Had [Mr. Gagliardi] disclosed his disreputable conduct [ECM] would have immediately dismissed him for Cause. b. Had Mr. Gagliardi disclosed his disreputable conduct [ECM] would have ceased paying him any salary and would not have paid him any New Issue Bonus.”
“Mr Gagliardi, 15:46:27: “At 1:00pm”
“…I hereby certify that I have: (i) received a copy of ECM’s Compliance and Supervisory Procedures Manual (“the Compliance Manual”); and (ii) read all provisions of the Compliance Manual including the Code of Ethics.”
“Mr Murphy, 18:14:30: “I shut off that stupid chat btw with them”
“Where were they all summer”
“richie playing slap dick, fuck toresco, and fuck sumner/aaron”
“i talk to u and lerch thats it from now on” … Mr Murphy, 18:32:14: “and i aint talking to Richie anymore hes a waste of time”
“Mr Gagliardi, 06:05:01: “U read this nonsense ?”
“Also the investor call with UBS went very well this morning.”
“Mr Gagliardi, 18:13:45: “They think your a liar”
“Mr Gagliardi, 20:37:57: “Highly unlikely ready for Dec 1”
“what u talking about?”
“we have to get away”
“from all these people”
“Mr Murphy, 19:14:38: “use them for the time being”