Hedge fund pioneer Arki Busson has not enjoyed the best of fortunes in his business ventures in recent years.
The French financier — known for once hosting the glamorous £10,000-a-ticket ARK charity gala and for relationships with Hollywood actor Uma Thurman and model Elle Macpherson (as well as his frequent appearances on dailymail.co.uk) — has endured a string of negative headlines.
LumX, the investment firm he runs, posted years of losses and then in 2019 fell out with auditor EY, which said its financial statements “do not give a true and fair view of the consolidated financial position of the group” at the end of 2018. In 2020 it delisted from the Swiss stock exchange.
The FT revealed last year that LumX subsidiary LumRisk, a Swiss fintech that he chairs, had suffered a staff exodus and had tried unsuccessfully to raise money.
A spokesman for LumX said the company “continues to have the unconditional and unanimous support of shareholders and noteholders.” His statement is included in full at the end of this post.
LumRisk plays a key role in the plumbing of the investment industry and its financial position will be watched with interest. The firm provides risk analysis on the underlying holdings of Ucits funds that are subject to daily regulatory reporting requirements, and runs risk scenarios for big institutional investors concerned about how their portfolios will react to market shocks.
The latest problems involve a SFr7.5mn fundraising that LumRisk conducted back in 2019 through the issue of convertible notes for product development and “to refinance past investments”. Although the investors were not disclosed at the time, FT Alphaville can reveal that the money came from just a handful of sources: Busson himself, his pals Louis Bacon’s Moore Capital and Paul Tudor Jones’s Tudor Investment Corporation, and an Australian psychiatrist named Dr Martyn Ewer.
The notes had punitive terms. If LumRisk wasn’t sold then, at the end of 2022 when they matured, the company would not only have to pay back the principal but a hefty so-called ‘redemption premium’ equal to double the principal, meaning a total SFr22.5mn could be due back.
But at the end of last year LumRisk did not pay up. Wanting the money he believed he was due, Dr Ewer gave LumRisk a notice of default, also claiming that he had not received the financial statements from the company that the notes entitled him to.
In response, LumRisk made an offer that other investors would buy his notes from him for a sum equal to less than 7 per cent of the total payout Dr Ewer was claiming, with an additional sum payable if LumRisk was sold within two years.
Dr Ewer rejected the offer. In response, LumRisk’s lawyers accused him of trying to disrupt its business and said that the company was in a state of “over-indebtedness”, meaning it was not allowed to repay the notes.
Busson told FTAV in an interview in April that he did not know the total amount owing to investors but that, “under Swiss law, the company has to recover earlier losses to be in a position to pay back the noteholders. I’ve been told by the lawyers that everything is subordinated and the company is not allowed to reimburse a penny”. He later added that the company “has never been in default”.
However, the documentation to the notes did not specify that the redemption premium was subordinated, according to people familiar with the matter. In other words, this would be due back regardless of how badly the company was doing.
Dr Ewer, who had by this time appointed a Swiss lawyer, eventually had his notes redeemed in full at the end of April after they were bought out by another investor.
Dr Ewer then issued a curious statement (in slightly broken English), saying that LumRisk “is not, nor has never [sic] been, in default” and adding the following fulsome praise:
We would like to take this opportunity to thank the LumRisk management team, led by André-Arpad Busson, for their excellent stewardship of LumRisk and wish them well as they continue to develop the most advanced set of risk management tools.
(A person might wonder why any investor would issue such a statement unless they were required to do so in order to be repaid.)
“As a noteholder, we remain supportive of the company,” said a spokesman for Moore. Tudor declined to comment on its investment.
“A combination of shareholders and noteholders are putting money to the company to invest in its future and growth,” Busson also told FTAV. “We have the support of the big, big majority of the noteholders.”
The curious financial situation of LumRisk does not end there. A filing in Switzerland earlier this year also reveals that LumRisk fell behind in paying state pension contributions, and that it also owed money to marketing firm Reverse Capital and professional services firm Inergy.
When shown a copy of the filing by Alphaville, Busson said he was “not aware of any claims”. He later told FTAV that there were “absolutely no overdue sums”.
A LumX spokesman said by email:
LumRisk, a global leader in risk analytics platforms, is on course to having one of its strongest years since inception after signing a number of significant new clients. We also have the largest pipeline of global new business as we continue to demonstrate the effectiveness and importance of our risk management systems.
Our company continues to have the unconditional and unanimous support of shareholders and noteholders, who are committed to us unlocking our full potential. LumRisk also received an additional infusion of capital in April to help finance the current acceleration of its growth.
We have continued to develop our platform and to launch new products that have been very well received by the marketplace. Notably, we recently presented our new LumRisk Star and LumRisk Light products at the Global EQD conference in Las Vegas, to very positive reviews, and have already signed up their first clients.
We are actively recruiting in all areas of the business to support our ongoing growth.
In summary, LumRisk is fully focused on meeting the challenges of its rapid growth, while continuing to service its global institutional client base of sovereign investors, state and corporate pension funds and global asset managers, active in both Quantitative Investment Strategies and multi-asset programs, with tools that are widely recognised as the most advanced in our area of expertise, for both pre- and post-trade analysis.
