Counsel for Daniel Schlaepfer, president and corporate secretary of Select Vantage, told Justice Des Fagan on the first day of a defamation trial Monday that ASIC had made accusations of market manipulation without identifying any specific piece of evidence to back up its claims.

Schlaepfer is suing ASIC and the regulator’s head of market supervision, Greg Yanco, for making six allegedly defamatory statements to UBS, Bank of America Merril Lynch, Credit Suisse, and Deutsche in November 2014, including that Schlaepfer had engaged in criminal conduct by “layering” the stock market and warning the firms against doing business with Select Vantage.

“The regulator, which has enormous powers within the Australian market and can generate criminal prosecutions, simply says we don’t have to identify any sets of trades, we don’t have to identify any traders involved in the manipulative conduct, we’re going to throw, as it were, all of that into the mix and say at the end of the day Dan Schlaepfer must have intended, personally intended, to manipulate the market in this way. Now that, your Honour is a shocking allegation when we get to look at the evidentiary underpinning,” Schlaepfer’s barrister, Terry Tobin, QC, said during his opening submissions.

Between 2003 and 2009, Schlaepfer worked for Swift Trading and its chief executive Peter Beck, which were fined £8 million by the UK’s Financial Services Authority in 2011 for market manipulation. Swift was dissolved in 2010 and Schlaepfer was appointed president of Select Vantage in September 2011.

Instead of seeing Schlaepfer and Select Vantage as operating independently from the incidents surrounding Beck, ASIC viewed him as “son of Swift,” making accusations based on his connection with the ill-fated firm rather than any evidence, Tobin said.

“[There was] little effort to actually analyse the trading patterns that they were seeing and enquiring objectively into whether those patterns disclosed market manipulation in the form of layering or in any other form in that matter.”

Layering is a market manipulation technique in which a trading firm makes and then cancels buy or sell orders they never intended to make to “tilt” the market and influence the stock price.

Schlaepfer had learned from his experience with Swift that compliance was an “essential part” of the business model and had created a system for Select Vantage that ensured his 3,000 traders worldwide were “heavily surveilled,” Tobin said.

Schlaepfer, through Select Vantage and another firm Merlito Securities, headed up his global network of day traders with direct market access supplied through Morgan Stanley from 2012 to August 2014 and then with Macquarie Securities.

In a telephone conference between ASIC and Macquarie in November 2014, the regulator made a “poison kill” linking Select Vantage to Swift, which led to Macquarie severing its contract with Select Vantage, Tobin told Justice Fagan. “ASIC has been promoting what politely would be called a canard, a deception, with regard to that allegation.”

The six defamatory statements at the heart of the case were allegedly made after Select lost its contract with Macquarie. Yanco made four phone calls the same month to UBS cohead of equities, Steve Boxall; Bank of America Merrill Lynch head of compliance Australia, Anatoly Kirievsky; Credit Suisse director of compliance, Andrew Couper; and Deutsche director of markets compliance, Lee Newton.

A further two defamatory statements were allegedly made at meetings between ASIC and Citi and Bank of America Merrill Lynch, also in November.

Notes from the meetings were distributed around these organisations, Schlaepfer says in his statement of claim.

Justice Fagan questioned whether ASIC had expressly made an order to stop Select Vantage trading on the market, saying communications to Macquarie had noted the regulator was still analysing the data. “It doesn’t seem to have reached the point of, ‘we’ve decided you’ve got to stop giving them access to the market, so please do’.”

“A wink is as good as a nod,” Tobin replied. “ASIC is saying we suspect manipulation and, in the tone of their analyses, they believe without having heard at all from Macquarie or from Merlito or Select Vantage that there’s layering … and they’re then saying to Macquarie we want you to cease their trading.”

By November 2014, Select Vantage was executing US$3 billion in trades per day globally. Locally, 8 percent of orders by value and 13 percent of orders by volume within the Australian stock market were made by Select Vantage, which had brought in $10.9 million worth of revenue in the 12 months prior.

Schlaepfer is seeking damages, included aggravated damages, permanent restraints on ASIC and Yanco from publishing related defamatory material, and a declaration that the statements made by the regulator led to a tort by injurious falsehood.

Tobin will continue his opening submissions Tuesday.

Mark O’Brien Legal represents Schlaepfer and Select Vantage. ASIC and Yanco are represented by Ashurst.

The case is Daniel Schlaepfer & Anor v Australian Securities and Investment Commission & Anor.

Correction: Lawyerly misidentified Schlaepfer’s barrister as Tim Tobin rather than Terry Tobin