A signboard advertising IREO stands in front of buildings being constructed by the real estate firm in Gurgaon, India, Tuesday, March 20, 2018. The Indian company that is partnering with the Trump Organization on an office tower project has been accused of running an elaborate real estate swindle that cheated investors out of nearly $150 million, according to complaints filed with Indian authorities. The documents make no mention of the Trump Organization, and focus largely on two real estate deals that began years before the organization signed a 2016 agreement with IREO to partner on an office tower in Gurgaon, outside New Delhi. (AP Photo/Oinam Anand)
Ireo is one of India’s biggest property developers. Investors accuse its management of ‘siphoning’ much of the $1.6bn it raised for its own benefit © AP

Investors including hedge fund boss Christopher Hohn have called for the ousting of managers at an Indian property developer with links to US president Donald Trump, as they step up efforts to recover $1.6bn of investments.

Sir Christopher risks losing about $40m of his own money and roughly $140m from the charitable arm of his hedge fund on investments in Ireo, one of India’s biggest property developers, which has been accused of stealing vast amounts of assets.

The British hedge fund billionaire is part of a group of about 400 investors — including university endowments, wealthy individuals and other hedge funds — who accuse Ireo’s management of “siphoning” much of the $1.6bn it raised for its own benefit.

They have accused Ireo’s managing director Lalit Goyal of creating a web of companies to channel capital away from property projects via side dealings with people close to the Indian property developer.

Mr Goyal told the Financial Times allegations against him were “all bullshit” and part of a “malicious campaign” to discredit him. He said: “This is a classic hedge fund strategy to take over the company from me and give it to somebody else.”

He added that there was no evidence of redirecting funds and no evidence in the statement of a “so-called whistleblower” that Ireo had received funds unlawfully. He also claimed accusations of manufacturing a web of companies for his benefit were a lie.

Allegations of fraud and mismanagement at Ireo come months after Abraaj, once the Middle East’s largest private equity group, collapsed following accusations that it used investors’ money to fund its own expenses.

Axon Capital, a US hedge fund, and Sir Christopher’s Children’s Investment Fund Foundation (CIFF), say that together they hold more than 20 per cent of Ireo funds and invested roughly $300m. With the support of more than 100 investors, Axon has filed legal proceedings in India to remove management and to block sales of assets to safeguard them while the company is being investigated.

A letter sent to investors by Axon, which is run by former Goldman Sachs trader Dinakar Singh, and CIFF said: “We are worried that Goyal [and] Ireo are intentionally creating damage and committing new frauds to cover old ones” by liquidating companies and hiding previous deals.

The letter, seen by the FT, added: “Faced with the prospect of wrongdoing uncovered, they have appeared to be almost intentionally trying to ‘scramble the egg’ and both create damage and shuffle and sell assets and initiate liquidations, to both hide past transactions and to steal money from the company while they can.

“Their behaviour has been disgraceful,” the letter said. “We have pleaded to the [Indian Supreme] Court that they should consider replacing/suspending Goyal and replacing him on an interim basis with an administrator (likely a retired judge).”

It added: “Obviously, we cannot predict what will happen, but based on the proceedings so far, our attorneys have significant hope that the Supreme Court will rule in our favour and potentially immediately suspend Goyal (and possibly even demand his passport be revoked and/or he be arrested).”

$300m

Amount Axon and CIFF invested in Ireo funds

On top of the millions that these investors risk losing, they say that several billion more could be lost by homebuyers in the form of advance payments, according to the letter. “Sadly, many homebuyers have been devastated by paying for their homes up front, and subsequent failure of Ireo to deliver homes to these buyers, even after many years.”

Mr Goyal told the FT he rejected the allegations in the letter sent to investors. He added: “We have delivered millions of square feet to thousands of customers.”

Hundreds of blue-chip investors also face heavy losses on their investments in Ireo, including the endowments of Notre-Dame university and Stanford University, which stand to lose millions of dollars.

A person close to Sir Christopher, who earned $274m from his hedge fund TCI last year, said that while the potential loses were substantial, they only represented 2 per cent of total net assets of CIFF. His personal exposure of close to $40m to Ireo was detailed in his divorce proceedings in what became Britain’s biggest settlement at more than £337m in 2014.

Ireo has links with the US president after partnering with the Trump Organization to build an office tower on the outskirts of New Delhi two years ago. At the time, Donald Trump Jr, the son of the US president, called Ireo a “truly a fantastic group”.

Sir Christopher and Axon Capital declined to comment.

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