AUS
NZ
UK
CA
USA
IND
Summary
- UBS refused to file required Suspicious Activity Reports due to tech entrepreneur Mike Lynch’s involvement.
- UBS and Jefferies were hired by Darktrace for the IPO.
- Lynch is accused in a US $11-billion fraud in selling his company Autonomy to HP.
UK cybersecurity firm Darktrace’s initial public offering (IPO) is under the shadow because of its links to tech entrepreneur Mike Lynch. Swiss multinational investment bank UBS announced that it would not work on Darktrace IPO for compliance reasons. Darktrace was headed for its £4-billion IPO and UBS and Jefferies were employed to lead the IPO. After initial rumours that the company would go for a listing on the US stock exchange Nasdaq, the company finalised on a London IPO. Some experts have pointed out that the valuation of Darktrace was over-estimated.
Also Read: Moonpig To Launch Public Issue in London Worth £1 Billion
The cyber security provider was in talks with several bankers for some months over the legality of Darktrace’s listing before finalising on the UBS group.
UBS said that it has backed out after the US began the extradition proceedings against Lynch, one of the initial shareholders in the company. The investment bank refused to file the mandatory Suspicious Activity Reports because of Lynch’s involvement.
The UBS Group is not the only one to step back. It has been reported that several banks, including Goldman Sachs were reportedly not invited to be a part of the process or could have declined because of Lynch’s involvement in the company.
Also read: Amazon-backed Deliveroo Valued At $7Bn, Looking At Potential IPO
It has, however, been reported that the IPO was on schedule and would now be led by Jefferies. The UBS has refused to comment on the issue, while Darktrace said that the decision had nothing to do with the tech company and said it was something internal.
Copyright © 2020 Kalkine Media Pty Ltd.
Charges against Lynch
Lynch has allegedly defrauded US-based Hewlett-Packard in 2011. HP had bought Autonomy, a company owned by British tech entrepreneur Lynch, for US $11 billion.
Lynch has defended himself for about a year against HP and would now have to face criminal charges in the US courts. He has been accused of pumping up sales in Autonomy to make it look like a sound business proposition to HP. HP had to put the valuation of the company at US $8.8 billion, only a year after shelling out US $11 billion in acquiring it.
In order to restrict the US from contesting his case there, Lynch wanted to exploit an important amendment to the extradition treaty between the two countries. He was expected to push for an argument that the UK would be a more appropriate choice for a criminal proceeding, despite English prosecutors not wanting to go ahead with an investigation.
British lawmakers believed the provisions of the extradition agreement between the two countries was dissimilar and that the UK administration should impede the extradition till a judgment is out in his London trial. The civil trial got over last year, and Lynch had said that HP could not prove any wrongdoings on his company’s part.
However, in January UK PM Boris Johnson went on record saying that the government would not get embroiled in the case. Last year, Johnson said that he was being pressurised to keep the legal proceedings in the UK.
Johnson later clarified that after going through the agreement he was convinced that the system was working as was desirable. This was also being interpreted as Johnson’s refusal to get involved with any clashes with the US’s new administration.
Extradition and beyond
In the event of Lynch’s extradition to the US getting blocked, the Serious Fraud Office (SFO) in the UK has the right to try him in the UK, sources said. The SFO in 2015 ended its investigations in the case and told the US authorities it had the right to conduct parts of the probe. But in case the extradition got blocked, the UK would re-open the case.
Lynch’s lawyers have pointed out that the US extradition could be blocked as per the forum bar, where the courts can stop extraditions if much of the alleged criminal activities were conducted in the UK. His lawyers have argued that the case was significant for UK businessmen and could set a precedent for businessmen accused of criminal charges.
His lawyers have also argued that the US authorities could find only two HP shareholders who had invested in the stock, after HP announced that it has acquired Autonomy. They argued that one of them made a loss of US $10,000 and another gained US $1,600, but the maximum fallout of the alleged fraud happened in the UK.
