(Bloomberg) -- The founders of a failed London brokerage, which saddled some of the world’s largest banks with tens of millions of dollars of trading losses when it collapsed, have settled a $125 million lawsuit for pennies on the dollar.
Alberto Statti and Caterina De’Medici — who set up Invexstar Capital Management — agreed to pay the firm’s liquidators €500,000 ($541,000) to settle a legal claim against them after “protracted correspondence,” according to a UK corporate filing. The pair have paid €350,000 so far and “discussions” are ongoing about the rest, the filing shows.
At the time of its collapse eight years ago, Invexstar had built up trading positions with a notional value of more than £1.25 billion ($1.59 billion) despite having capital of less than £1 million. Wall Street banks including BNP Paribas SA, Morgan Stanley and Nomura Holdings Inc., were left nursing more than £100 million of losses when Invexstar was forced to close after the firm was caught out by moves in the bond market.
ING Groep NV and Mizuho Financial Group Inc. were also hit by the collapse.
Despite the scale of the losses, none of the banks involved were prepared to fund the proceedings required to bring the claim to court, according to a person with knowledge of the situation.
“The costs to take matters to a trial, and enforce a monetary judgment, were significant and it was not possible to obtain funding or support from the major creditors to fund such action and there was no guarantee of success,” SFP Group, the liquidators for Invexstar, said in an emailed statement. “Following advice, the matter was settled outside of court.”
Representatives for BNP Paribas, Nomura, ING, Mizuho and Morgan Stanley declined to comment. Statti also did not respond to requests for comment, while De’Medici could not be reached for comment. They have both denied the allegations in a defense document.
Even as Invexstar built up tens of millions of dollars worth of trading positions, the brokerage did not put on any off-setting positions and did not have the funds to settle its trades, the liquidators alleged in their lawsuit last year.
Statti, for his part, was managing Invexstar’s daily operations and conducted much of its trading even though he was not authorized to conduct such business by the UK financial regulator, the liquidators alleged in their complaint. De’Medici was the firm’s sole director and “did not exercise any oversight of his activities” or the company’s management, they said.
“An assessment of the financial position of Ms. de’Medici and Mr. Statti was undertaken and it was identified that their level of assets was vastly less than the level of losses which were being pursued,” SFP Group said in its statement. “Therefore the maximum which could be recovered from continuing with proceedings would only result in a proportionally small return to creditors.”
Invexstar was not Statti’s first business failure. An earlier business ceased trading in 2008 after suffering losses of £54 million, while a second firm collapsed in 2013 owing about £12 million to creditors including JPMorgan Chase & Co., according to UK regulatory filings.
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