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October 27, 2017  

Finacity Accused of Snatching Trade Secrets

Lord Capital is suing Finacity for allegedly stealing its trade secrets.

Lord filed its complaint on Sept. 18, pointing to an October 2015 arrangement in which it was to work alongside Finacity to arrange securitizations of trade receivables for clients. Lord claims that during the buildup for an initial deal, for printing company Flint Group, Finacity abandoned the partnership and instead lined up the funding on its own.

The New York Supreme Court complaint hinges in part on non-compete and confidentiality agreements under which Lord supplied the processes for gaining off-balance-sheet treatment for Flint’s securitized assets. The New York firm maintains that just days after signing those documents, Finacity proposed to Flint executives that it should assume all responsibility for the deal.

Finacity then funneled Flint’s receivables into a newly established fund and completed a bond sale in January 2016.

Essentially, Lord contends that Finacity was pretending to work with it as a pretext for stealing its proprietary information. It is seeking $5 million of lost fees and an injunction that would prevent its Stamford, Conn., rival from using its trade secrets.

As a smaller company, Lord said it believes Finacity saw it as lacking the capital to pursue the matter in court. “This action is directed at the sort of criminal knavery that gives Wall Street a bad name,” Lord wrote in its complaint.

Finacity has requested that instead of arguing the case in the New York trial court, it be transferred to U.S. District Court in New York, citing the fact that Lord is alleging violations of the federal Economic Espionage Act and Defend Trade Secrets Act.

Finacity is led by chief executive Adrian Katz. Its owners include Bank of America, Kleiner Perkins and TPG. The investors supplying capital to its clients have included Magnetar Capital.

Lord is led by former Mellon Financial executive Stephen Ceurvorst. The firm, which spun off from TMF Group subsidiary Lord Securities in 2003, gains off-balance-sheet treatment for clients’ assets in part by taking stakes in their deals. After removing those receivables from their books, those operations often can convince banks to offer them additional funding at lower costs.