An affiliate of Ion Group, the Irish financial software behemoth whose derivatives trading arm was hacked this year, was sued by a partner for allegedly backing out of an investment agreement.
S3 Partners LLC, a provider of short-interest, holdings and securities finance data, alleges that Ion-owned Fidessa Corp. owes the company $6.25 million but is refusing to pay because Fidessa and Ion have so much debt that it “simply cannot find the money,” according to a complaint filed Thursday in state court in Manhattan.
“While Fidessa portrays itself as a highly successful business, the truth appears to be that the highly-leveraged Fidessa is presently incapable of satisfying its contractual obligation to invest a mere $6.25 million” in S3, the company said in the complaint.
S3, which said Ion has $10 billion in debt, also accuses Ion founder Andrea Pignataro of using “various means to attempt to mask the troubling fact that Fidessa cannot meet this capital call, including by making false promises.”
“Fidessa, a minority investor with over $33 million in S3, has been targeted with baseless claims by the company,” a representative for ION said in a statement. “S3, which has failed to meet its objectives, lacks audited accounts, carries a substantial debt and faces a severe cash shortage, is seeking additional funds by filing these unfounded claims against Fidessa. Fidessa categorically denies the meritless nature of these claims and is taking necessary steps to protect its interests and reputation in all relevant jurisdictions.”
Pignataro, a press-shy former bond trader, has quietly built Ion into one of the finance industry’s main providers of market-structure software, which ensures the smooth trading of stocks and bonds. The derivatives market was thrown into disarray earlier this year when subsidiary ION Trading UK succumbed to a cyberattack.
The lawsuit offers a rare peek into the secretive company’s financial affairs.
The dispute stems from a 2021 investment agreement, in which Ion took a stake in S3 for about $33.8 million plus the promise to provide up to another $6.25 million in exchange for more shares, according to the complaint. S3 said it began asking for that money starting in December, alleging that Fidessa has so far been unwilling to pay.
“Fidessa made a number of burdensome requests for financial statements and supplemental information in bad faith,” S3 said in the complaint. “Moreover, even upon receipt of the information it requested, Fidessa neglected its obligations.”
S3 is asking the court to make Fidessa pay it the $6.25 million under the agreement, or to pay at least that amount in damages.
Ion acquired Fidessa in 2018 in a deal worth about $2 billion, outbidding a rival offer from Temenos Group AG. Fidessa provides equity-trading services.
Bloomberg LP, the parent company of Bloomberg News, competes with Ion in providing financial institutions with execution management solutions, connectivity to electronic markets and trading tools. S3 does business with Bloomberg LP, which carries the firm’s short-interest tool Black APP on its terminal.
The case is S3 Partners LLC v. Fidessa Corp., New York State Supreme Court, New York County (Manhattan).
(Updates with response from Ion in fifth paragraph)