Hedge funds accuse Indian developer Ireo of up to $1.5bn fraud

Two high-profile hedge funds have accused one of India's biggest real estate developers of defrauding its foreign investors of as much as $1.5 billion (Dh5.51bn), potentially one of the largest private equity scams ever.

Ireo Management engaged in a billion-dollar criminal conspiracy involving shadow companies, dumped documents and “astonishing theft”, according to Axon Capital and Christopher Hohn’s Children’s Investment Fund Foundation.

“Someone cannot simply just take billions of dollars of our money and get away with it,” Axon’s Dinakar Singh, a former Goldman Sachs trader, told about 70 investors on Monday at the Westin New York Grand Central hotel. “If we do nothing, we will largely bleed dry and get nothing back.”

Mr Singh, 48, discussed what he described as evidence of Ireo's long-running, “brazen” fraud, the latest possible example of investors getting burnt speculating on developing markets.

Axon and the Children's Investment Fund Foundation – one of the largest philanthropies in the UK – invested about $300 million in Ireo. Other investors include Notre Dame University and the University of Rochester, according to a source, who asked not to be identified. Stanford University was also an investor, Barron's reported earlier this year.

Scott Malpass, Notre Dame’s chief investment officer, declined to discuss the school’s investments, as did a spokesman for Rochester. A Stanford representative did not immediately respond to a request for comment.

The investors allege Ireo managing director Lalit Goyal created a web of shadow companies connected to his relatives, friends and business associates to siphon money from the fund. The hedge funds originally estimated the alleged fraud by Ireo executives at about $147m, but raised that estimate at Monday’s meeting.

Ireo did not respond to a request for comment before the meeting. The firm has denied the fraud allegations in earlier legal filings.

The two hedge funds said they first noticed red flags with Ireo management four years ago.

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In 2016, they filed a legal proceeding in Mauritius, where the fund is based, to stop Ireo executives from withdrawing management fees. That same year, Ireo partnered with the Trump Organisation to build an office tower on the outskirts of New Delhi. At the time, Donald Trump Jr called Ireo “truly a fantastic group”. Amanda Miller, a Trump Organisation spokeswoman, did not respond to requests for comment.

In February, Mr Singh and Mr Hohn’s funds filed a complaint against Mr Goyal with police in New Delhi and a second one last month. They also sought an asset protection order from India’s high court.

Mr Goyal has dismissed 150 employees in the past three months and transferred more of Ireo's assets into his wife’s name, former chief executive Ramesh Sanka, now a whistle-blower, alleged in a presentation at Monday’s meeting. Company employees also loaded stacks of documents and records from the firm’s main office into a rental van, according to the more recent criminal complaint.

“Until a few months ago, I thought we were only robbed of a few million,” Mr Singh said. “But that’s just the tip of the iceberg. It’s almost hard to believe.”

Mr Goyal owns homes in Singapore and Dubai, Mr Singh said, adding that he fears Mr Goyal might flee if authorities do not move fast enough to investigate Ireo.