We have seen this story play out before.
Russian fund manager and entrepreneur, German Lillevyali, who is - or was - President of GL Financial Group, a Swiss- and U.K.-licensed asset manager with branches in Moscow, Zurich, Geneva, London, Cyprus, and Belize, has disappeared without a trace. The professional investors who according to Bloomberg had $250 million under management at the end of last fiscal year, may have disappeared to Cyprus or some other Russia-friendly jurisdiction.
A recent Facebook post under the name of “German Lillevyali” attempted to soothe a group of investors who had concerns about GL Financial Group’s solvency.
“I promise you the money is safe,” it said. “I will return it personally, there is nothing to worry about. Please send me a personal message if you want more information,” the Facebook post read.
The flagship company of the group is GL Asset Management. It appears that Lillevyali lured in investors with promises of high returns and a fancy description of his “market-neutral” fund — deploying “state-of-the-art mathematical models and algorithms” to trade international equity markets. In other words, someone who pretended to be a quant but wasn't.
“GL Asset Management specialises in market-neutral investing and are known for a precise and rigorous approach to developing and managing innovative investment strategies. By deploying state-of-the-art mathematical models and algorithms, combined with active management, we offer our clients the opportunity to invest in liquid, equity-trading portfolios that are designed to grow and preserve their wealth while minimizing risk,” the ‘About us’ section on LinkedIn read.
The goal of the fund was “to grow and preserve their [investors] wealth while minimizing risk,” however, today the case is precisely the opposite.
According to Bloomberg, GL Financial investors around the globe are trying to redeem their money even as GL employees resign en masse. The company’s website domain has been shut down, offices closed, and even phone lines have gone dead. Some of the disgruntled clients include an executive who works for billionaire Oleg Deripaska, high ranking managers at Swiss drugmaker Novartis AG, San Francisco-based Levi Strauss & Co., and even FIFA soccer stars.
Bloomberg documents the story of GL Financial’s unraveling, which is now being heavily scrutinized by European regulators:
“Regulators in Britain and Switzerland, has been pieced together from interviews with eight clients and former employees. They requested anonymity either because they don’t want to jeopardize efforts to retrieve their savings or because they fear for their physical safety.
Calls and messages to the numbers listed for GL Financial and related companies weren’t returned or went to voicemail. When Bloomberg reached Lillevyali himself via WhatsApp on Wednesday and Thursday, he declined to identify his current location three times, saying he’s not ready to play “the anti-hero.”
Lillevyali rejected any suggestion that he lost or is withholding client funds. He said the most he ever had under management was about $140 million and that about $35 million belonging to about 30 people is now frozen, mainly due to “compliance issues” related to sanctions. U.S. and European sanctions only apply to a few dozen Russians, none of whom are known clients. He said “a large number” of customers are getting repaid, though he did not name any.
“It’s like a bad movie,” said one customer angry at what he described as being stonewalled for months.”
In a Twitter post from February 09, under the Twitter handle “German Lillevyali” (unconfirmed by Twitter’s employees), Lillevyali boasted about his chess playing abilities and how he recently defeated former Russian chess grandmaster and world champion Anatoly Karpov. Karpov’s assistant in Moscow told Bloomberg she could not confirm or deny that claim.
More recently, he was interested in the amount of negative-yielding debt
Former-employees of GL told Bloomberg that they didn’t know when they were partying on the 62nd floor of the Federation Tower in December "that months earlier Lillevyali had exited the ownership structure of his main Russian vehicle for attracting clients, Ankor Invest,” which was confirmed via regulatory filings.
Then in March, Russia’s central bank terminated Ankor’s license for “numerous” violations of securities law it did not identify. Lillevyali said Ankor Investment’s primary violation was that most assets under management were held outside of Russia, mainly in Europe. The Russian Central Bank has given Lillevyali to the end of June to halt operations.
Bloomberg adds that Swiss financial watchdog Finma and Britain’s Financial Conduct Authority have been asked to investigate GL, but by now it's surely too late.
“An American client who worked in Russia from 2014 to 2017 and is now based in Switzerland said Ankor’s demise came as a surprise because he’d seen steady returns of about 7 percent a year—at least on paper—since a relationship manager at the firm first reached out to him via LinkedIn in 2015.
Like other clients, he said he was impressed that GL’s web of affiliates seemed to have well-established operations in Switzerland. He said an executive in the Zurich office held a video conference with him and the firm’s representatives in Russia had Swiss mobile numbers and addresses on their business cards.
He invested $100,000 the first year then another $100,000 in each of the following two years, money he said he was saving for a house and his children’s education. The company was attentive and sent him annual gifts, first a bronze statue and then an expensive calligraphy set. After Ankor was blacklisted, he said a sympathetic employee in Moscow urged him to withdraw his funds, but he couldn’t get anyone from Zurich on the phone. When he finally got through, he said he was told his money was “stuck in the bank” and he hasn’t been able to reach anyone since.”
Another disgruntled client told Bloomberg that his GL account manager told him to redeem his funds because of the uncertainties that started to swirl around the company in late 2017. The company told the client in early 2018 that his funds would be wired to him within 15-days. The money never came. Why was the client gullible enough to watch hundreds of thousands of his hard earned money vaporize? Because he thought the fraudulent investors had a "veneer of Swiss respectability."
“A disgruntled German client said GL’s veneer of Swiss respectability won him over, too. After a broker he trusted recommended the firm in late 2016, he decided to invest an initial $250,000. He balked when he was told his money would be routed to Belize, but went ahead after receiving a letter signed by Lillevyali himself reiterating that he’d be able to withdraw his funds at will.
By last December, as Lillevyali was preparing for his party at Sixty, the German client said an account manager in Zurich urged him to redeem his funds because things were starting to look “shaky.” When he tried, he said he was told there’d be a delay due to his U.S. citizenship, which he doesn’t have
Months later, he said he got an email from the Belize affiliate, Financial Alliance Ltd., saying his money would be wired within 15 days. He’s still waiting. A Dutchman seeking to reclaim $500,000 told a similar tale.”
Dmitry Pronyushkin, a client who is suing Ankor, said he constructed a website to warn people about Lillevyali, but nobody believed him until it was too late? Why? Because it appears that most rich people are gullible idiots:
“They had the facade of a decent company, the Swiss offices, that’s why so many decent people believed them,” he said.