UK property investor Robert Tchenguiz owes spread betting company CMC £1.31mn after losing a high-profile legal battle in the High Court.
CMC, which offers online spread betting on financial markets, sued Tchenguiz, alleging that the businessman failed to pay money owing on his accounts after the pandemic plunged markets into turmoil in the spring of 2020.
Tchenguiz, who also built a reputation as an activist investor before the financial crisis of 2008, rejected the claim and argued CMC had breached its contractual obligations by closing down his account and trading positions.
The entrepreneur also argued that CMC, which was founded and is run by Conservative party donor Peter Cruddas, had mistakenly classified him as a professional client — a designation that allowed him to run a deficit on his account but gave him fewer safeguards than retail customers.
On Friday, David Elvin QC, sitting as a deputy High Court judge, ruled in favour of CMC. “In my judgment, the defendant was lawfully categorised as a professional client and CMC did not fail to comply with the duty to give appropriate warnings,” Elvin ruled.
The dispute stems from the return Tchenguiz made to activist investing in 2019, when he took a position in UK bus and rail operator FirstGroup, supporting a campaign for change at the company by US hedge fund Coast Capital.
By March 2020, Tchenguiz had amassed “significant exposure” to FirstGroup through a series of positions taken with CMC as well as rival spread betting firms. The exposure amounted to about 35 per cent of the free float of FirstGroup.
Tchenguiz, whose activist investing campaigns prior to the financial crisis included UK supermarket J Sainsbury, incurred losses on his exposure as FirstGroup shares were swept up in the wider fall in markets.
CMC failed to act in his best interests, according to Tchenguiz, and should have discussed a compromise proposal which would have “avoided the need to join in with the fire sale” of FirstGroup shares in March 2020.
Elvin ruled on Friday that it “is clear that prior to opening the account with CMC, Mr Tchenguiz was well aware and understood the effect of being classified as a professional client” which Elvin said allowed him to trade on a highly leveraged basis in relation to FirstGroup shares.
Tchenguiz said he plans to appeal against the decision.
“I was very disappointed with the court’s decision today. I am determined to get a fair outcome as my position is not unique — there are a lot of people who have found themselves in the same position I am,” he said.
CMC has been contacted for comment.