Yahoo Finance Weiss Multi-Strategy Advisers’ Bonuses Spark Fight With Jefferies
(Bloomberg) -- Weiss Multi-Strategy Advisers LLC paid $28 million in employee bonuses weeks before announcing it would be shutting down, sparking a legal fight with Jefferies Financial Group, which is owed tens of millions of dollars.
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WMS sued Jefferies and its investment management affiliate, Leucadia Asset Management, on Monday, alleging Jefferies used the threat of its own lawsuit over the bonuses to impose a forbearance agreement that boosted Jefferies debt over obligations owed to other creditors. WMS, which also filed Chapter 11 bankruptcy on Monday, said it is seeking to avoid the amended forbearance agreement.
The lawsuit also seeks to use Chapter 11 to recover $20 million transferred to Jefferies over the past two years, claiming the payments either favored Jefferies over other creditors or were obtained unfairly under the threat of litigation over the bonuses. Jefferies has denied the allegations and said WMS is acting in bad faith.
Jefferies is a major creditor of WMS and is owed unpaid notes and obligations under a strategic partnership that dates back to 2018. WMS Chief Operating Officer Pierce Archer said in a sworn statement that the firm and its associates owe $43 million in outstanding notes and about $52 million under the strategic partnership deal.
George Weiss’s companies “have engaged in a series of inappropriate and underhanded actions over the past year that have harmed Jefferies,” Jefferies said Tuesday in an emailed statement.
WMS had been in negotiations with Jefferies before it opted to pay the bonuses. Starting in January 2022, WMS agreed to a series of forbearance agreements after failing to meet minimum equity covenants. WMS continued to operate normally under the forbearance agreements which included paying year-end bonuses, Archer said.
But in December Jefferies required a WMS affiliate repay the outstanding notes, which the firm couldn’t do, Archer said. Than in early February, Jefferies proposed a forbearance agreement that required WMS and its affiliates to obtain Jefferies’ consent before paying employee bonuses.
WMS refused to agree to those terms and paid more than $28 million in bonuses soon after, Archer said. The firm advised Jefferies of the bonuses on Feb. 11, a few days after WMS started processing them. In response, Jefferies demanded WMS enter into an amended forbearance and threatened to bring its own lawsuit to clawback the bonuses if the firm didn’t do so, Archer said.
The potential clawback lawsuit would also seek damages from WMS for breaches of the underlying notes purchase agreement, according to Archer.
“The Debtors stand by the allegations in their adversary complaint, and disagree with Jefferies’ unfortunate comments,” lawyers for WMS said in a statement.
George Weiss founded the firm in 1978. It managed about $2.3 billion in net assets on a discretionary basis as of the end of 2023.
The case is Weiss Multi-Strategy Advisers LLC, 24-10743, US Bankruptcy Court, Southern District of New York (Manhattan).
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