The H2O scandal bounces back in Luxembourg

Why were a lawyer and a financial adviser from Paris in the courtroom of the interim relief judge of the Luxembourg District Court on a November morning? Don't be fooled by the small size of the room; it is inversely proportional to what is at stake. A decisive part of the H2O financial scandal hangs in the balance – a scandal that has prompted a group of 6,000 investors to claim over 700 million euros from a dishonest management company. If the court grants the collective's request, the aggrieved investors will gain access to crucial documents for their forthcoming legal battle in France against several big names in the financial sector implicated in the H2O fiasco.

The connection with Luxembourg only surfaced belatedly in the course of this scandal, which came to light three years ago. Until a few months ago, the affair seemed confined to France. It emerged in August 2020 when the Autorité des marchés financiers (AMF, the French equivalent of the Commission de surveillance du secteur financier) decided to temporarily close down all trading in seven French UCITS (Undertakings for Collective Investment in Transferable Securities) managed by H2O AM LLP, a London-registered asset management company, and its Paris-based French subsidiary, H2O AM Europe. Put plainly, since that date, no investor has been able to exit the fund – and thus recover their investment – or to enter the fund by investing in it. This emergency decision was justified by the collapse of these investment funds and their inability to meet redemption requests from unit-holders.