Multibank Group takes German partner Von Der Heydt Group to court
MultiBank Group is suing Von der Heydt (VDH) Group over murky transactions in mutual funds undertaken by the German a private investment and real estate firm. The multi-regulated broker accuses VDH of fraud, breach of fiduciary duty and bad-faith dealings.
VDH was allegedly in breach of the European regulatory framework and Luxembourg regulations, MultiBank said.
For perspective, MultiBank Group entered into a joint venture project with VDH Group from 2017 to 2020. During this period, the company invested over €43 million based on representations made by VDH Group and its CEO, Michael Gollits.
MultiBank’s key claim is that VDH Group didn’t disclose that its trading and investment activities were unlawful and violated Luxembourg and German regulations. The business relationship has taken a turn for the worse in 2018 after German police raided the offices of a money manager in Berlin on suspicion of conspiracy to defraud investors.
Stephan Blohm, then the CEO of VDH Group in Luxembourg, was a main suspect and faced criminal charges for participating in a classic Ponzi scheme. Lawyers for some 3,000 investors, who paid nearly €300 million to the firm, filed criminal complaints seeking restitution.
Now, a complaint filed by MultiBank claims that VDH Group didn’t reveal “adverse findings” of the supervisory commission of the Financial Sector in Luxembourg (CSSF). Specifically, the watchdog referenced 12 “severe deficiencies in relation to the functioning of the Funds.” The lapses ranged from inability to provide the auditor with sufficient details about the company’s activities to assets misvaluation and lack of internal controls to prevent money laundering and terrorist financing.
As also charged, Michael Gollits used VDH clients’ money on highly leveraged CFDs referencing precious metals which are banned under EC Law for certain investment funds. To create the illusion of stability, Gollits concealed large trading losses from investors and took commissions for VDH Group on his illegal trading which were paid out of clients’ money he invested, the statement further reads. Some of these funds eventually completed the circle back to him.
VDH and its operatives kept shifting their tactics as regulators and supervisors began to scrutinize their activity, issuing misleading explanations regarding the investments, until eventually the hidden realities come to light.
To preserve their credibility, MultiBank offered to pay German noteholders their funds which were diminished as a result of “unlawful actions” by Von der Heydt Group. The group, however, emphasizes that it has made the offer benevolently as it has no obligation to do so.
In a twist to the saga, VDH Group joined the plaintiffs in a lawsuit against a BVI-based subsidiary of MultiBank Group (MBFX). The latter described the move as a last-ditch attempt by VDH to distract their investors from their unlawful activities. The company referenced a recent judgment in the High Courts of the BVI, where a court found that Michael Gollits had told “untruths to the MultiBank Group about the illegal trading in the notes, deliberately lying about the illegality of the project.”