Company did no business, filing says

An investment bank is being wound up after racking up operating costs of as much as US$1 million a month despite never bringing a single product to market.

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An investment bank is being wound up after racking up operating costs of as much as US$1 million (Dh3.6m) a month despite never bringing a single product to market in the two years since it was founded, it has emerged in court documents. The filings show that Ernst and Young was hired on March 31 to act as a liquidator for Diwan Capital, which focused on derivatives but is no longer operating.

Two shareholders of Diwan Capital, Alfred and Georg Wiederkehr, have filed a claim in the Dubai International Financial Centre (DIFC) Courts to appoint a new independent liquidator for the company. A new liquidator is being sought "due to unfair prejudice to the applicants as minority shareholders and other shareholders by not promptly appointing a liquidator upon the shareholder resolution to wind up the company and state intent of the company to continue expending costs not in the interest of the wind up".

The claimants are lawyers in Switzerland who were part of an original group of investors in the company. The investors included Buti Saeed al Ghandi, the chairman of Emirates Investment and Development, and Abdulwahab Ahmad al Nakib, the chairman of Univest Group. Richard Bushman, who joined Diwan Capital as chief executive last year, said in a defence filing that the company had seen its staff reduced to three people and its shareholders' equity decline to $3m from the $17m it had raised at its founding.

Mr Bushman denied that the company had acted against the interest of shareholders and said the remaining employees were simply trying to wind up the company in the least expensive way possible. Diwan Capital had failed substantially to meet its goal of being "an early-mover and market leader in the creation and trading of sophisticated financial instruments in the securities market of the GCC". "The management team were not successful in operating the business," Mr Bushman wrote, referring to his predecessors. "They took months to get a licence, instead of weeks as they had promised. They were unable to generate shareholder consensus on even the simplest questions, and spent - again - months trying to agree on Articles of Association. They disagreed among themselves and fired most of the founders. They maintained high operating costs, of between $500,000 and $1,000,000 a month.

"Insofar as the shareholders are aware, they never brought any product to market; never proposed a specific transaction to any counter party; never generated even one dollar of revenue." The company, which is also known as D1 Capital, was registered in the DIFC in January 2008. A press release at the time said it would be the "first boutique investment bank in the GCC to focus on the engineering, selling and trading of options, structured products, and securitised derivatives based on local and GCC equities as its core business".

The liquidation case comes as the Middle East derivatives market is expected to expand this year, according to 79 per cent of fund managers and brokers polled by NASDAQ Dubai. Jeffrey Singer, the chief executive of the exchange, said "investors are poised to make increasing use of the Middle East equity derivatives market, which is still in its infancy and has potential for rapid growth". bhope@thenational.ae