London-based hedge fund Eisler Capital is facing a £2.5m ($3.4m) lawsuit from former trader Bharat Garg, who was dismissed after a delay in disclosing his arrest and multiple breaches of the firm’s compliance policies during his brief tenure at the firm, according to a report by Bloomberg.

Garg, previously a director at Morgan Stanley, joined Eisler in March 2024 with a “substantial commercial package” including a $1m signing bonus and staggered payments worth approximately $3.5m through 2027. He was arrested in November 2024 over a sexual allegation unrelated to his employment. The investigation was dropped days after his termination, his lawyers said.

Eisler contends Garg failed to promptly inform the firm of his arrest and subsequently refused to provide details about the investigation. The hedge fund suspended him on December 17 and terminated his employment two days later, citing breaches of internal compliance policies requiring timely disclosure of criminal investigations. Eisler has counter-sued to recover £768,982 of the signing bonus.

In a statment, a spokesperson for Eisler Capital said: “Eisler expects all its employees to maintain the highest standards of professional and personal conduct and to abide by Eisler’s compliance policies. Mr Garg’s employment with Eisler was lawfully terminated without notice due to his failure to comply with the terms of his contract and Eisler’s policies.”

Garg’s legal team argues the dismissal was wrongful, emphasising that the criminal investigation was “false” and closed without charges. They maintain he disclosed the arrest in a timely manner and offered to provide further information, which Eisler declined.

Founded in 2015 by former Goldman Sachs partner Edward Eisler, the multi-strategy hedge fund is expected to manage over $3bn by year-end, according to previous reports.