Indian financial group IIFL Wealth has asked a judge in London’s High Court to throw out a claim that it had some responsibility for an alleged fraud tied to the largest takeover by failed payments group Wirecard.

The hearing on Thursday was the latest step in litigation related to a series of 2015 transactions in which Amit Shah, a co-founder of IIFL Wealth, allegedly arranged for an investment fund to buy an Indian business called Hermes for €36mn and then sell it to Wirecard weeks later for €326mn.

The case against IIFL Wealth comes at a moment of intense international focus on the use of Mauritian fund vehicles, following short seller allegations of market manipulation against Indian conglomerate Adani. The Adani group has denied wrongdoing.

IIFL Wealth established and administered a Mauritian fund used in what the court heard was the “flip” of Hermes, as part of a claim from two former minority shareholders in the business that they were defrauded when they sold their shares at the €36mn valuation.

The Financial Times has previously reported that James Henry O’Sullivan, 48, an Englishman awaiting trial in Singapore on allegations he helped forge documents central to Wirecard’s accounting fraud, directed the Indian “flip” and used the IIFL fund to hide his involvement in the transactions, according to whistleblowers and documents that show his collaboration with Shah.

The transactions are the subject of criminal investigations in Mauritius, India and Germany. No person has been charged in relation to these probes.

Wirecard, which collapsed in June 2020 after a multibillion-dollar accounting fraud, is not a party to the claim after an English court ruled in related proceedings a month later that the “inherent probability” was that the payments group did not know the price at which Hermes was sold to the Mauritius fund.

In 2017, minority shareholders filed a suit against Shah, an IIFL Wealth UK subsidiary, and two Indian brothers who were the majority owners of Hermes before the “flip”. The brothers failed in an attempt to have jurisdiction in the case moved to India.

In February 2022, the minority shareholders filed fresh claims against IIFL entities in Mauritius and the UK, and Thursday’s hearing concerned procedural arguments about whether that suit was lodged too late and so was “time barred under English law”.

Arguments in court on Thursday centred on when it was reasonable to expect them to have lodged their claim. Rajesh Pillai, KC, acting for IIFL said “the claimants are sophisticated commercial investors who could have investigated and then pleaded the essential facts” shortly after they became aware of the sale of Hermes to Wirecard in late November 2015.

“Objectively speaking, the claimants would have known there was a real chance they had been defrauded,” Pillai said, pointing to an FT article published that month that raised questions about Wirecard’s takeover.

Anna Dilnot, KC, representing the minority shareholders, described the arguments as circular “from the mouth of the fraudster”. She said: “There were lies, and there were express lies, and they left my clients with nowhere to go.”

In Shah’s defence to the 2017 law suit he had claimed that IIFL had no relationship to the Mauritius fund, known as “EMIF”.

He has since left IIFL and has separate representation. In a subsequent amended defence, he said that he established EMIF with employees of IIFL and as an officer of IIFL. The claimants said that it was new information discovered from 2019 onwards in the Wirecard proceedings that allowed them to bring the claim against IIFL.

“You can’t allege Amit has been dishonest until you know the role of EMIF,” their counsel said.

Pillai said “to the allegation that ‘IIFL is EMIF’: it is denied, and it’s an incredibly broad brush claim,” that would be properly addressed if the case proceeded.

He added that “Mr Shah is not here to argue his claim”, but that the arguments for fraud were disputed and denied.

The judge, Simon Rainey, KC, said to expect his ruling in due course.

 



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