A brash young Mexican financier's plans to take over a Swiss bank fizzled last year. Now, he has turned up in the scandal surrounding the vanished $50 million «Flash Crash» fortune.
A reputation is ruined faster than a wealthy landowner and would-be Swiss bank owner would like: Jesus Alejandro Garcia Alvarez was lauded as a Mexican entrepreneur with big plans in Switzerland as recently as three years ago in «Neue Zuercher Zeitung am Sonntag» (in German).
Garcia Alvarez and his firm, IXE Group, were planning to shift from Mexico to Switzerland for security reasons, and to start a bank for entrepreneurs.
Shortly after, Garcia Alvarez announced plans to buy Ticino-based Arner Bank, a Swiss bank struggling to survive after Switzerland has largely abandoned banking secrecy. In conjunction with the sale, the bank reorganized its board under renowned Swiss banker Michael Baer as chairman.
Arner Deal Fizzles
The young would-be financier said he wanted to shift Arner, which like many banks in the region has stowed money for wealthy Italians, into a trade financing and business loans institute.
But the deal fizzled last year under mysterious circumstances, reportedly over capitalization.
Garcia Alvarez has kept a low profile since then, but he has resurfaced in an unlikely place: a UK and U.S. investigation into the causes of 1,000-point drop in the Dow Jones Industrial Index six years ago, the so-called Flash Crash.
$50 Million Vanishes
The Mexican financier had, through his Zurich-based firm IXE which is unrelated to a major bank in Mexico of the same name, cultivated Navinder Singh Sarao, according to «Bloomberg». Sarao, a day trader who still lived at home and had accumulated more than $50 million, is at the center of a joint investigation into the causes for the massive drop in the index in 2010.
Sarao's problem: his $50 million trading fortune, which he had accumulated over eight years while still living with his parents, had largely vanished.
The former day trader eventually agreed to work with authorities to track down the money. Approximately $32 million of it went to Garcia Alvarez, it emerged.
Gaping Story Holes
It isn't the first time that questions have been raised over the Mexican businessman's dealings: German economic magazine «brandeins» cast doubt over Garcia Alvarez’s claims of extensive land-holdings in Mexico, Bolivia and Peru and of his plans for commodities riches.
The entrepreneur, who claims to be the scion of a wealthy family, is an imposter, the magazine concluded.
Sarao worked with so-called advisors and introducers who appear to have been operating at the outer fringes of legality. It had been such an intermediary which introduced the day trader to Garcia Alvarez, who was looking for investors for IXE Group.
The institute was in the process of transforming from a Zurich-based family office into a conglomerate of globally active firms in agribusiness, wealth management, venture capital and commodities trading.
$32 Million to Switzerland
Around this time Garcia Alvarez, who was also launching a charm offensive via Swiss media, flew to London to meet Sarao several times. According to «Bloomberg», he promised Sarao returns of up to 11 percent in risk-free transactions.
The day trader bit: he transferred $17 million to Garcia Alvarez’s firm, and later another $15 million.
At first, the business relationship appeared to going as planned: IXE sent Sarao period statements describing solid-performing assets. For his part, Sarao also sunk part of his trading profits into a gaming platform and other ventures.
Follow the Money
According to «Bloomberg», Sarao had roughly $50 million in assets spread across several offshore and other vehicles when he was arrested. He was ordered to pay the Commodity Futures Trading Commission (CFTC) $38.4 million.
The only problem? He couldn’t find the money. Sarao’s lawyers attempted to trace the funds for months, but the bulk including the $32 million entrusted to Garcia Alvarez remains elusive.
The IXE head had promised Sarao and investigating officials to pay back the funds in tranches in 2015 and last year. The deadlines came and went, but the funds weren't repaid. Garcia didn’t comment to «Bloomberg».
Garcia Alvarez's Bank
An associate told the outlet that IXE and Garcia Alvarez hadn’t done anything wrong, and that the firm had made the business risks clear to Sarao. A lawyer for Garcia Alvarez told the newswire that all accusations levied at the businessman are without foundation.
Sarao, now free and awaiting sentencing, is back at home with his parents, who took out a second mortgage to finance his £50,000 bail. Authorities had agreed to lower his bail in return for his cooperation in tracking the assets.
And what of Garcia Alvarez, who has dropped out of sight but still maintains an office in central Zurich? Bahamas officials gave him the green light in January to buy Private Investment Bank, a Bahamas-based subsidiary of Banque Cramer in Geneva.
