CL-2020-000117 - [2025] EWHC 1620 (Comm)

Falcon invested a total of €5.3m in a security issued by Notenstein Finance (Guernsey) Limited on 7 October 2015. Falcon disposed of its investment in this security on 1 June 2016 for a total of €161,000, representing a 97% loss on the investment. This product was materially similar to the EFG CH0273395175 product considered already and like that product is only of benefit to the investor if the sovereign debt concerned perform negatively by reference to the defined events. As Mr Holt says in his first report, there is no evidence that “… the requisite “credit events” occurred in the relevant countries during this period (or subsequently)…” That provides a commercially credible reason for a deterioration in the value of the product down to the date when Falcon sold it. In those circumstances I cannot safely conclude that it was commercially irrational to have sold the product when it was sold. I cannot safely conclude either that this product was not one that Falcon should have been investing in for the reasons identified when considering the EFG CH0273395175 product. Although the claimant suggests that Mr Ökten’s reasons for recommending its purchase (being that the product was in line with the investment objectives of all three sub funds because “it offers protection against bad macroeconomic scenarios”) were “thin” that does not provide a basis for concluding that it was a fraudulent investment given the factors that Mr Holt identified summarised above.

In relation to commission, on 13 October 2015, SVC invoiced Leonteq for “Sales Commission for Leonteq Warrants ( 110) NFG INV CLN EN 170110” in the sum of US$2,325,000.00. That sum was credited to SVC’s bank account the following day. It represents 39% of the sum paid by Falcon to Leonteq and is manifestly excessive for the reasons I have given already.

As I have said above, I consider the commissions received by SVC were manifestly excessive. I accept the claimant’s submission that they were subtracted from and paid out of the funds invested with the result that the cost of the investments was higher by at least the amount of the commissions. I accept that ultimately Mr Serwin received significant sums as a result of the arrangements set out above. I accept also that Mr Ökten was aware of these arrangements and at least in part benefitted from them but was willing to approve the purchases notwithstanding that knowledge. It is to be inferred that he had that knowledge from at least the invoice he rendered in relation to the first of these transactions the size of which is consistent with him knowing of the arrangements that had been made. As I said earlier, anyone with the knowledge and experience of Mr Ökten would know that commissions of this size were unjustified and unjustifiable commercially but I infer that he was prepared to ignore that fact because of the payments that he received ultimately from Mr Serwin. It is beyond sensible argument that to pay and receive these commissions given the position of Mr Serwin and Mr Ökten was to intentionally do an act foreseeing that damage in the amount of the commission would be inflicted on Falcon as a result. In the result, whilst I accept that to solicit and then receive the commissions I have referred to was and is indefensible, I am not able to accept that it necessarily follows that the investments to which they related were also indefensible for the reasons I have explained above.