GF Securities Owned Hedge Fund Lost $139 Million on FX Trades

Because of the hedge fund's losses, Citigroup is feeling the pain.

GF Securities Co. announced this Wednesday that its GTEC Pandion Multi-Strategy Fund SP lost $139 million in 2018, mainly on foreign exchange (forex) trades, according to a report from Bloomberg.

You might recall that in December of 2018, reports surfaced that Citigroup was facing a loss of $180 million, on a bad loan to an Asian hedge fund, which was owned by GF Securities, that took high-risk FX bets, as Finance Magnates reported.

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Today, Bloomberg has connected Citigroup’s loss with that of the Pandion fund, with the GF Securities statement and people with knowledge of the matter telling the news outlet that as the fund’s losses started to build up and it went into negative capital, it faced margin calls from Citigroup.

This issue was escalated to the bank’s board and prompted the firm to restructure its prime brokerage business. Under the changes, Citi’s forex prime brokerage business was moved out of the US bank’s currency trading division to be under the same umbrella as its prime financing and securities services business.

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Pandion Losses Caused by TRY Trades

According to one of the sources speaking to the news outlet, the losses were mainly from trades in the Turkish lira (TRY), which experienced significant losses last year, particularly during the month of August.

The large drop in the value of the TRY followed on from tensions between Turkey and the United States, which saw the US government double the steel and aluminum tariffs on the country. This was in retaliation for the imprisonment of an American pastor Andrew Brunson in the country, as Finance Magnates further explained here.

In January of this year, Citigroup indicated that it took a charge of $100 million to $200 million for losses that were tied to loans to an Asian hedge fund. However, it didn’t identify which fund that was. At the time, Chief Financial Officer John Gerspach said some of the charge might be reversed, Bloomberg reported.

A spokesperson for Citigroup and GF Securities have not responded to media requests for comment.

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