Trader dragged into a market-abuse probe won fight for $9.3m bonus withheld by his former firm

The City of London. Photo / Jose Sarmento Matos, Bloomberg via The Washington Post

A London hedge-fund trader who was dragged into a market-abuse probe that rattled Wall Street won his legal fight for a multi-million bonus withheld by his former firm Evolution Capital Management.

Robert Gagliardi claimed he was responsible for nearly all of the firm’s revenue but was wrongfully denied his performance bonus after it emerged that he was caught up in a sprawling block-trading investigation by the United States Department of Justice and Securities and Exchange Commission.

UK media reported court documents claimed that when Gagliardi confronted the fund’s founder Michael Lerch about the bonus, he was told: “I’m not going to pay you the bonus, f*** you, sue me”.

The firm argued it would never have hired Gagliardi in the first place had it known about the case, which didn’t lead to any action being taken against the trader.

While acknowledging the input of Gagliardi into the fund’s returns, Evolution had argued that was outweighed by the damage done to the firm’s reputation in dealing with the probe and that the bonus was discretionary.

Yesterday, London judge Neil Calver sided with Gagliardi, ruling that he was owed a bonus of US$5.4 million ($9.3m) plus interest.

He’d originally sought a bonus of US$6m, while Evolution had attempted to bring its own counterclaim.

Seth Redniss, Gagliardi’s lawyer, called the ruling a “total vindication”.

“Ninety-seven per cent of revenues, assets tripled, four days on the stand. The judge found ‘exceptional profit’ and evidence honestly given,” said Redniss.

“Rob didn’t just win the case - he proved he drove the returns and told the truth.”

Lawyers for Evolution didn’t immediately respond to an email seeking comment.

Gagliardi’s tenure at Evolution in the United Kingdom lasted for just 10 months. Gagliardi was told by the SEC that it wouldn’t take any further action against him in March 2024.

Prior to that, Gagliardi received a subpoena and seizure order for his phone at the airport after flying into Los Angeles in November 2021.

The subpoena - which also named former Morgan Stanley banker Pawan Passi - had some of “the biggest names” in equity capital markets banking, Gagliardi said at the trial.

In 2024, Morgan Stanley agreed to pay a total of US$249m to the Justice Department and the SEC to settle their probes into its block-trading business.

The investigation focused in part on whether employees shared or misused information about impending transactions in ways that broke securities laws.

“There is no question that Mr Gagliardi made exceptional profit for the funds,” the judge said, adding that Gagliardi’s evidence was consistent with the email record.

“He was also willing to accept that the tensions within the firm that bubbled to the surface were at least partly his fault and also that he could be volatile, which is undoubtedly true,” the judge said.

Evolution’s counterclaim, which alleged that Gagliardi received information which he knew was confidential, was dismissed.

“The inadequacy of the plea in the counterclaim is even more stark in circumstances where the SEC and the DOJ determined not to bring any charges against Mr Gagliardi after their investigation,” the judge said.

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