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Financial trading group XTX Markets is taking legal action against investment managers Aviva and Legal & General for refusing to allow it to deposit cash into some of its funds after they invaded Ukraine last year because the owners of the firms are Russian citizens and therefore exist. discriminate.
London-based XTX is majority-owned by Russian-born billionaire Alexander Gerko, who has lived and worked in Britain since 2006, according to a copy of the legal statement seen by the Financial Times. , not subject to international sanctions.
When the companies refused to work for XTX when the Russia-Ukraine war broke out in 2022, Gerko held dual Russian and British citizenship. He later renounced his Russian citizenship, XTX said.
XTX, one of the world’s largest proprietary trading and market-making groups, had sought to invest some of its own cash with money market funds from Aviva Investors and L&G Investment Management.
XTX, which reported profits of £1.1bn last year for its UK entities, claimed that refusal by those entities to provide services to it constituted discrimination based on the race of their owners.
Aviva Investors said it would defend the claim but declined to comment further. LGIM declined to comment, but said in a defense filing that it did not discriminate against XTX.
The cases, which have been brought at the Midlands Court of London, highlight the risks for companies taking a “cautious” approach to accepting work they believe risks breaching international sanctions. Violation of sanctions may result in severe financial or prison penalties.
XTX is seeking a court declaration that Aviva Investors and LGIM breached the UK Equality Act by denying Gerko services to the company because of his Russian citizenship. XTX has not asked the court to award damages.
Gerko, a former Deutsche Bank trader and one of Britain’s wealthiest men, has publicly criticized Russia’s war in Ukraine. His company has pledged tens of millions of pounds to charities in Ukraine.
He was Britain’s biggest taxpayer last year, according to the HMRC sunday times. He is said to have become a British citizen in 2016.
In its legal statement, XTX said it had told Aviva and LGIM that it should not be denied access to its funds because neither the company nor Gerko was based in Russia.
“Instead of properly interpreting sanctions regulations or conducting effective due diligence, some companies are refusing to deal with Russian businesses,” Sunil Samani, co-head of legal at XTX Markets, said in a statement.
“We are taking legal action not to seek any financial compensation, but to highlight this discrimination and set a precedent to help those who have been and continue to be treated in the same way.”
According to the allegations against LGIM, the company told XTX that it was taking an “extremely cautious approach” to sanctions compliance and taking a “conservative stance” on whether to provide services to it.
An LGIM employee allegedly emailed XTX in June 2022 stating that the company “will not accept new clients with Russian citizens in any ownership structure at this time.”
In its defence, LGIM said some of the statements in the claim were inaccurately summarized and denied that it took a “conservative stance” on XTX in general.
In its defense, LGIM said it had apologized for the emails, which did not accurately reflect its position, and later sent XTX a detailed explanation.
The defense added that LGIM had provided other services to XTX and that the trade group’s claim fell outside the scope of the Equality Act as it involved an application to invest in an Irish entity.
The claims against Aviva and LGIM mirror a similar case XTX filed last year against accounting firm Mazars, which allegedly refused to provide payroll services. Mazars declined to comment, but people familiar with the matter said it was defending the claim.
Additional reporting by Jane Croft in London
Svlook
