With Bill Ackman, Tennis and Herbalife Can Be A Dangerous Mix
Two of the things that William Ackman is most passionate about-tennis and Herbalife-came together on Tuesday in a way that must have disappointed the billionaire hedge fund manager.
The Securities & Exchange Commission on Tuesday charged two men with insider-trading in Herbalife, claiming they learned about Ackman's huge $1 billion short bet against Herbalife in 2012 before it became public from a former Pershing Square analyst and made profitable trades on the information. Sources familiar with the matter say that the former Pershing Square analyst in the SEC case is Mariusz Adamski, who was the New York roommate of Filip Szymik, one of the individuals the SEC charged on Tuesday. Adamski, whose name was first reported by The New York Times, has not been charged with any wrongdoing and every indication is that he won't be charged. Syzmik has settled the SEC charges.
Ackman is an avid tennis player, a sport he has played since he was a child growing up in Chappaqua, N.Y. Even now as he oversees $15 billion at his Pershing Square hedge fund, Ackman continues to find time to play. A few years ago, Ackman hired Adamski, a number 1 doubles player at Wake Forest University, after the two were introduced by an investment banker. 'I told him I'll teach him the investment business and he's teaching me tennis,' Ackman told Bloomberg News in May 2012.
Ackman is known for making unorthodox hires at his hedge fund. He has previously hired his fishing guide and a man he met in a cab. Ackman hired Adamski in 2010 as an intern and eventually put Adamski, who became a research analyst, to work on Herbalife, a company that in December 2012 Ackman called a pyramid scheme. In addition to researching the diet shake seller, Adamski also played a lot of tennis with Ackman, says a person familiar with the matter.
Adamski, a 28-year-old who grew up in Poland, was grateful to Ackman for giving him the opportunity to learn about the investing game at Pershing Square, says a person familiar with the matter. In New York, his roommate was Syzmik, Adamski's childhood friend from Poland and another former tennis star who was once one of the top-ranked junior players in Poland. The two also played tennis together. When Adamski came home from working at the hedge fund, the two would talk about their days. Adamski told Szymik, who worked at a consulting firm, that anything he ever learned from him about Pershing Square was highly confidential and should not be traded on, the SEC says.
Adamski left Pershing Square in September 2013. It was a heated time in the Herbalife war. Shares of Herbalife had been soaring, hurting Ackman's hedge fund returns, as big investors like George Soros and William Stiritz took positions in Herbalife's stock. Around this time, Ackman filed a complaint with the SEC, claiming that as part of its long position in Herbalife, Soros Fund Management had broken insider-trading rules. The complaint seemed like a bit of stretch since Soros' family office didn't have any material non-public information about Herbalife, although Ackman's complaint also involved concerns about investors working as a group without making proper disclosures.
The New York Times speculated earlier this year that the SEC's scrutiny over Herbalife trading was sparked by Ackman's complaint in the summer of 2013. In any event, it seems that Adamski had left Pershing Square prior to any SEC investigation. The SEC case against Syzmik, Adamski's friend and former roommate, is unorthodox. Syzmik didn't have any material non-public information about Herbalife. The SEC claims only that he knew about Pershing Sqaure's short position prior to Ackman making it public. Syzmik also didn't trade in any Herbalife securities-rather it was his friend, Jordan Peixoto, who purchased Herbalife put options. And in the end Peixoto didn't even want to make money off the trades. The SEC says he wanted the options to expire without exercising them, but one of Peixoto's brokers refused and he ended up getting $47,100 in profits. The SEC's case against Peixoto is pending.
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