‘Captain Magic’ Clashes With Tycoon Over $5 Billion Hedge Fund

(Bloomberg) -- Raffaele Costa’s two-month business relationship with an Asian real-estate tycoon has sparked a two-year fight in the London courts following claims that the hedge-fund manager exaggerated his supercomputer’s trading abilities.

Costa’s Tyndaris Investments is suing Samathur Li Kin-kan for $3 million of unpaid fees for managing his money, according to court documents. Li’s investment company is counter-suing for $23 million claiming that Costa, a former founding partner at rival GLG Partners, overpromised what he could deliver with the technology used to make algorithm-driven trades, which lost money.

In 2017, Costa managed to persuade the 45-year-old son of Hong Kong billionaire Samuel Tak Lee to open a $5 billion account. He started trading Li’s money “through a leverage-arrangement” with Citigroup Inc on Dec. 19 that year, according to documents filed on Friday. Managing Li’s money was a significant win for Mayfair, London-based Tyndaris, which Costa founded in 2013 and which oversees disclosed assets of less than 1 billion euros ($1.1 billion). The plan was to gradually increase the money managed to about $5 billion.

Li pulled his money in February 2018 when he had $2.5 billion committed, according to the filings. Lawyers for Li’s British Virgin Islands vehicle MMWWVWM Ltd., referred to in court as VWM, said the fund lost $20.5 million in a single day on Feb. 14 following other losses in December and January.

A spokeswoman for Tyndaris declined to comment on the court filings before the trial, which is scheduled for April 2020. A lawyer representing VWM didn’t make Li available for comment. A Citi spokeswoman declined to comment on how much credit the bank had extended to VWM.

The court filings on Friday didn’t explain how Costa, a 49-year-old Italian who adopted the nickname ‘Captain Magic’ aboard his 177-foot yacht ‘Sea Force One,’ first met Li. Costa was named by The Guardian newspaper as among those attending the controversial Presidents Club dinner in January last year, while he was still managing Li’s money.

Li’s father Samuel Lee owns swathes of London real estate and is the second-largest owner of publicly traded landlord Shaftesbury Plc. Li has rarely been in the headlines since a 2011 divorce in which a Hong Kong court awarded his ex-wife 1.2 billion Hong Kong dollars ($153 million).

Tyndaris’s “artificial intelligence trading” strategy includes derivatives linked to stocks, bonds, currencies and market volatility “without any limitation” on geography or industry, according to its website.

Traders who bet that market fluctuations would be subdued were stung in February last year. Shahraab Ahmed’s hedge fund Decca was a high-profile victim of the sudden unwinding of short-volatility trades that roiled markets and prompted some banks to liquidate investment products tied to market gyrations.

--With assistance from Nishant Kumar.

To contact the reporter on this story: Thomas Beardsworth in London at tbeardsworth@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser, Marion Dakers

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