A London High Court has ordered Evolution Capital Management (ECM) to pay £4.5 million plus interest to its former star trader, Robert Gagliardi, after the firm withheld his bonus amid concerns over a U.S. market abuse investigation.

The dispute centered on a bonus tied to Gagliardi’s performance in 2022, during which he reportedly generated 97 percent of ECM’s profits. Gagliardi, who was recruited from a competing firm, had a contract that stipulated a discretionary bonus ranging between 10 and 15 percent of his earnings, dependent on his performance.

Michael Lerch, the head of ECM, initially refused to pay the bonus, citing a precautionary stance while U.S. regulators conducted a broad review of block trading practices on Wall Street. Lerch’s refusal was reportedly accompanied by a profane remark when Gagliardi pressed for his payment.

The dispute escalated to litigation, with Gagliardi suing for the withheld bonus and ECM filing a counterclaim seeking to recover more than £5 million in salary and prior bonuses. However, the judge described ECM’s counterclaim as “hopelessly vague” and dismissed it entirely.

In his ruling, Mr. Justice Carver criticized ECM’s decision to withhold payment, describing it as based on “irrelevant considerations.” The court found that ECM’s “wait and see” approach during the ongoing investigation was unjustified, particularly since the inquiry concluded without any charges against Gagliardi.

During the trial in October, Gagliardi testified that the conflict with Lerch was not due to his performance, stating, “The wheels didn’t come off. I made $68 million for him in five months.”

In addition to the £4.5 million bonus, ECM has been ordered to pay interest, with a possible additional £1.5 million, and is expected to cover the majority of Gagliardi’s approximately £2 million legal costs.

The case underscores the legal limits on employer discretion in discretionary bonus schemes, especially where performance is clearly documented and no wrongdoing has been established. It also highlights the risks firms face when using regulatory investigations as grounds to withhold agreed payments.