Source : Bloomberg :Andrea Tan:January 04, 2012, 8:06 PM EST
Citigroup Inc.’s Singapore unit sued Hong Kong-based hedge fund manager Raghavendran Rajaraman, seeking to recoup $1.03 million in trading losses the bank says he incurred after gold fell from a record high in September.
Rajaraman had $19.2 million worth of gold in his account on Sept. 23 which the bank sold, along with other collateral, on Sept. 26 “in the face of a rapidly deteriorating market,” leaving a $1 million shortfall, according to a Nov. 18 lawsuit filed with the Singapore High Court. The first closed hearing is scheduled for Jan. 27.
Gold plunged 11 percent in September, the most since October 2008, after futures reached a record $1,923.70 an ounce on Sept. 6. The bank liquidated Rajaraman’s account after it reached a so-called forced sell level and got his authorization, according to court papers. Gold for February delivery in New York was at $1601.30 an ounce at 9:55 a.m. Singapore time.
Rajaraman works with hedge fund 3 Degrees Asset Management and was a currency options trader with Citigroup in Singapore until 2007, according to the lawsuit.
He hasn’t filed his defense and didn’t return three calls to his mobile-phone. Richard Healy, Rajaraman’s lawyer at Oldham, Li & Nie, declined to comment.
“We intend to pursue the case and it’s inappropriate for us to comment further,” said Citigroup’s Singapore-based spokesman Adam Abdur Rahman.
3 Degrees Plan
Rajaraman isn’t a 3 Degrees employee, Moe Ibrahim, founder of the hedge fund, said in a phone interview. “There was a plan to launch a fund together but it never came to fruition,” Ibrahim said.
Citigroup breached its agreement by closing his account without prior notice, according to an Oct. 7 letter from Oldham, Li & Nie to the bank’s lawyers including William Ong at Allen & Gledhill LLP.
“As a direct consequence of the bank’s breach,” Rajaraman suffered a $1.7 million loss, representing his collateral, according to the letter. He incurred a further $1.03 million loss as the bank prematurely liquidated the account instead of waiting for 24 hours after the account reached the force-sell level, Rajaraman’s lawyers said in the letter.
The case is Citibank Singapore Ltd. v Raghavendran Rajaraman S826/2011 in the Singapore High Court.
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