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Berlin prosecutors have launched a criminal investigation into Lars Windhorst, whose financier was at the heart of the crisis at H2O Asset Management.
“The Berlin prosecutor’s office is investigating [Windhorst] for the alleged violation of German banking law, “prosecutors told the Financial Times, who acted after BaFin filed a criminal complaint.
BaFin declined to comment. People familiar with the matter say regulators are concerned about the activity of an investment vehicle called Windgst-owned Evergreen Funding.
The FT revealed in 2019, that H2O, a € 17 billion investment company, had invested money from its customers in non-liquid bonds linked to Windhorst. French regulators last year froze a number of bottoms to H2O for the “valuation uncertainties” of its substantial holdings in the bonds.
Evergreen was created as part of a plan devised by Windhorst to recover hard-to-sell assets from H2O. In June 2020, Evergreen issued a € 1.25 million bond that attracts investors with a strong annual interest rate of 12.5%.
However, the annual accounts of the Luxembourg-based vehicle for 2020 show that it lent loans at an interest rate of € 272 million to Windhorst and that it only had € 263.5 million in bonds in its balance sheet.
People familiar with the matter told FT that BaFin suspected Evergreen might have been involved in banking activities such as making deposits and lending without the necessary licenses.
BaFin subsequently froze Evergreen’s bank account in Germany and notified prosecutors in Berlin, where it has Tennor Holding offices in Windhorst. Unlicensed banking is a crime under German law and can be punishable by up to five years in prison.
“We are absolutely certain that there is no basis in the allegations, as neither Evergreen Funding nor any of the group companies have been involved in regulated banking activities,” said a Windhorst spokesman, who added that all Evergreen bonds are they repaid in full, including interest.
He added that the loan listed in the accounts, which was initially granted to Tennor Holding and later transferred to Windhorst, was used to buy bonds.
Born to middle-class parents in the small town of Rahden in 1976, Windhorst thrown to fame as an early teenage businessman and then German Chancellor Helmut Kohl was hailed as a wonderful man. But when he was 34, Windhorst had withstood the collapse of two companies, personal bankruptcy and a suspended prison sentence.
Following this conviction in 2010 for “breach of trust,” the German financier moved to London and began entering a series of complicated financial transactions with non-liquid debt securities. Several of these agreements resulted litigate, including billionaire Len Blavatnik and an investment vehicle linked to the Russia’s former energy minister.
Despite its legal problems, Windhorst has continued its frantic pace of recruitment, most notably buying a stake at the German football club Hertha Berlin in 2019. Recently joined Twitter in an attempt to dismiss criticism, and noted that “things are always reported about my company and I that I can’t leave and not leave without comment.”
H2O still holds more than € 1 billion in hard-to-sell assets linked to Windhorst and its Tennor group companies. After the French regulator forced H2O to temporarily freeze its funds last fall, the asset manager hijacked the annoying securities in “side pockets” on major funds, of which investors cannot change.
The fury caused the French bank Natixis to do so overturn their majority stake to H2O, cutting ties with an asset management unit once highly profitable.
H2O declined to comment.
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