One of the pioneers of the $5 trillion exchange traded funds market is being sued for hundreds of millions of pounds by three private equity groups who claim he failed to give them their just share of the spoils when he sold his businesses.
Graham Tuckwell is among the richest ETF tycoons, claiming to have created the first gold ETF, which allows people to invest in the precious metal in a way that can be easily traded on the stock exchange.
However, the private equity backers of his London and Jersey-based ETFS Capital business claim when he sold the company’s assets to Aberdeen Standard, Legal & General Investment Management and Wisdom Tree, he should have shared out the proceeds.
Instead, they say, he retained the cash in the business and is now using it to make new investments in breach of their agreement.
They are suing in a Jersey court for him to wind up the company and share out the assets among shareholders including them. They own 30% of the business.
The lawsuit marks one of the biggest breakdowns of relations between private equity houses and the management teams they back.
Tuckwell, who has recently moved to Australia where he is a renowned philanthropist, denies wrongdoing and says he does not owe the firms a penny. He says he is the majority shareholder and is running the company accordingly.
He points out that the main investor, Financial Technology Ventures, had already made a “massive” $100 million return on a $10 million initial investment. He says FTV knowingly sacrificed its rights to demand the business be wound up when it swapped its preference shares for ordinary, minority ones. The “pref” shares guaranteed a cash exit within five years, meaning Tuckwell would either have had to find new backers to buy FTV out or sell the business.
The claimants – FTV, Millennium Technology Value Partners and SIG Growth Equity Fund - say they invested on the understanding that ETFS would soon float on the stock market or be sold for more than $1 billion, returning them quick profits. In 2011, Bank of America Merrill Lynch and Citigroup were lined up to run the float while Goldman Sachs was hired to hunt for buyers.
Neither transaction happened, but Tuckwell eventually sold ETFS’s assets last year in three transactions totalling more than $600 million. Instead of sharing the proceeds, he has retained them and effectively turned the business into his own private office, the private equity funds say.
They also accuse him of ejecting their representatives from the company’s board when they overruled his demands such as a claim for a $6.7 million personal fee for selling the assets. They say that he previously paid himself $19 million in shares without the permission of the board. Tuckwell was blocked from receiving the sale fee and says the shares payment was part of his long term incentive plan.
Tuckwell says the claims about his personal behaviour were attempts to “smear” him and says it is “little short of astonishing” that the private equity firms did not know there was a risk the IPO might not happen.
Neither side were available for comment.