City trader who made bumper profits takes former bosses to court after he was denied a £4.5 million bonus

A City trader who made £50 million in five months for a hedge fund is suing his former boss after he was denied a £4.5 million performance bonus.

Robert Gagliardi, nicknamed Gags, claims he made up to 97 per cent of Evolution Capital Management’s revenue, and says its refusal to pay him the bumper perk was a breach of contract.

However, founder Michael Lerch, a former Princeton University footballer-turned-investor, says the bonus was only ever discretionary, and that there were question marks over Mr Gagliardi’s behaviour.

The High Court in London heard Mr Lerch – whose friends include Red Hot Chilli Peppers star Flea – texted a senior colleague saying Mr Gagliardi would ‘learn the meaning of discretionary very fast’ if he stepped out of line.

Head of trading Sumner Garber messaged Robert Toresco, a trader based in Hong Kong, saying: ‘It’s all upside to just say f*** you at this point. I call dibs on his bonus so I’m rich.’

Mr Gagliardi claimed that when he asked his boss directly for the payout, he responded: ‘I’m not going to pay you the bonus, f*** you, sue me.’

In a twist straight from BBC drama Industry, which lifts the lid on big-money finance traders who live celebrity lifestyles, Evolution is also counter-suing Mr Gagliardi for the £5 million it paid him while working there.

Asked about his time at the firm, between April 2021 and March 2022, Mr Gagliardi said he never met Mr Lerch in person, but placed his trust in him.

The trader claims he was denied the perk for ‘irrational, arbitrary, unreasonable and perverse’ reasons

‘It was like online dating,’ he said. ‘I took a leap of faith and he took a leap of faith.

‘We only spoke on the phone, so I was trying to feel him out, just like he was trying to feel me out. We got on well for a while, but I lost trust in Michael towards the end of my employment.’

Asked when the wheels started to come off, Mr Gagliardi said: ‘The wheels didn’t come off – I made 68 million dollars for him in five months.’

He added: ‘Michael should have paid me my bonus.’

In court papers, his lawyers said Mr Lerch’s decision to withhold the bonus was ‘irrational, arbitrary, unreasonable, perverse and made in bad faith’.

Andrew Legg, for Mr Gagliardi, said Evolution did not have ‘broad and unfettered discretion’ to refuse to pay the bonus.

‘It was contractually obligated to exercise its discretion lawfully,’ he said. ‘In failing to award him any bonus, Evolution acted in breach of contract.

‘Its exercise of discretion was arbitrary and unlawful, driven by irrelevant factors, and constituted a decision no reasonable employer in its shoes would have reached.’

He added the reasons Evolution has now given for not paying Mr Gagliardi’s bonus – that he was ‘unhinged’ or ‘impossible to manage’ – were never mentioned while he worked there and no disciplinary procedure ever happened.

The court heard Mr Lerch will claim the trader was ‘rude and abrasive’ and ‘a terrible teammate’.

Mr Gagliardi was hired by the firm because of his excellent track record, it was claimed, and that he generated ‘extraordinary return’ – between 94 and 97 per cent of the fund’s revenue during his 11 month tenure.

Evolution has been the subject of regulatory criticism and censure in Hong Kong, where Mr Toresco was flagged for not disclosing his personal holding.

Meanwhile, Mr Garber was fined and suspended by a Japanese regulator while he was working for Evolution, it’s claimed.

It is speculated the character John Malcolm in Ugly Americans: The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions is based on Michael Lerch and his exploits in Japan in the 1990s, as many of the events and timelines align.

The case continues.