Lars Windhorst and H2O: scandal, spies and the superyacht | FT Film

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My story has been, from the beginning, entrepreneurship, hard work, risk-taking, the relationships which you build through the business.

This is a story of superyachts, spies, and scandal.

This is a story about the lives of two consummate risk-takers colliding, through their collaboration destroying hundreds of millions of investors' money.

Bruno Crastes, one of the finest fund managers of his generation. Lars Windhorst, a racy financier with nine lives.

My estimated exposure is beyond 1.5mn euros.

Real people, people's pensions, people's investments.

Some of the underlying transactions could qualify as money laundering.

I made mistakes and I do work hard to rectify mistakes I made and people who have suffered because of my mistakes and lost money too.

The big question for me is: where has the money gone?

At the heart of this story, you have H2O Asset Management and its founder, Bruno Crastes, one of the biggest stars of European Investment, coming under the thrall of Lars Windhorst, a charismatic financier with a criminal past. My name is Lars Windhorst. I'm the founder and CEO of Tennor Group, which is a private equity investment holding company.

Why did you agree to do the interview?

It's just my own gut feeling. I mean, how bad can it be? It's much better than hiding and not showing up. The impression people might have is that I am driven by money, that I'm flamboyant. The reality is the opposite. Relationships motivate me more than money. My shortcoming has been that I have sometimes cared too little about money.

My name's Robert Smith. I'm the corporate finance editor at the FT.

I'm Cynthia O'Murchu. I'm an investigative reporter. I've been following Lars Windhorst for the past decade, and Bruno Crastes and H2O.

I first started looking at Lars in 2017, and we realised that H2O was a really big part of the story very shortly afterwards.

Lars Windhorst is one of the most enigmatic figures in European finance. He's got friends in high places - Michael Douglas, the Hollywood actor, to Wladimir Klitschko, the heavyweight boxing champion.

Since an early age, I had the dream to build a business empire. My first proper business was started when I was 14-years-old in 1991. By accident into the PC business, I got a phone call from my main supplier, a Chinese businessman. I met the guy. "I'm Lars Windhorst. We have an appointment." "What? You? You are 12. You are not 16."

About a month later, he said: "Look, everyone thinks it's crazy but there's something about you." The Chinese friend and business partner then moved into the guest room of my parents' home and we started.

He went on a business trip with Chancellor Kohl, who was one of the most powerful politicians in Germany.

This is not long after the Berlin Wall has fallen. Germany has this kind of yearning for this economic renaissance, and here, burst onto the scene, this teenager.

During that trip we got closer, me and the chancellor and became friendly. He invited me into a kind of informal economic advisory council of the government. I joined him on many different state visits to Asia, to America.

He was in all the media. It was a big circus around this young kid.

Lars is planning to build the tallest skyscraper in Vietnam, Windhorst Tower. He gets dubbed the 'German Bill Gates.' He's the wunderkind of German business.

Quite soon, into his business career, questions started to emerge.

Allegations of financial impropriety, business partners suing him. He has a string of lawsuits in his 20s.

It became a need to correspond to this amazing image.

The beginning of the end or the beginning of the first big failure, because it was too much, too quick, too fast, led to me becoming a bit careless.

In the 2000s, Lars has a string of corporate bankruptcies. He has a personal bankruptcy. He has criminal charges.

I had to ask my mother, grandmother, sister, father, a Chinese group to give me some money because I could not access any cash. A painful period for me, also for my parents. They accused me of delayed bankruptcy filing, fraud, and breach of trust. The legal advice was, this may take 10 years. I decided at that time in 2009 to do a plea bargain where I had to pay a fine and accept a suspended sentence, and I had a criminal record from then. It got deleted after 10 years.

And he avoids going to prison. But he has to stand up in court and he has to admit that he misappropriated company funds.

I did not procure properly signed board resolutions. To admit this is a lesser problem for me than to have a fraud charge. I did not have a hidden bank account where I misappropriated funds.

Some people might have been destroyed by all of this - not him.

Lars is a great corporate survivor, but he's also a literal survivor. He survived a plane crash.

The plane needed to do a fuel stop on the way, which was Almaty, Kazakhstan, and it was winter. Immediately, when it was in the air it started to shake and then almost flipped 90 degrees to the right. The plane broke apart and the back part exploded. The front part, where I was in, separated. The one pilot, sadly, died. The other one had a more severe injuries than me.

The German ambassador, when I woke up was there. A Kazakh nurse came in and started to, with the scissors, cut my jeans. I said: "Stop. I have only one jeans with me. Don't destroy my jeans. I need to go to Hong Kong." And then the ambassador said: "Listen, shall I bring a mirror? You will not go anywhere."

A week or so later, he announces that he's become one of the biggest shareholders in Air Berlin.

The deal from the hospital bed.

After the criminal conviction his reputation in Germany is pretty in the dirt. So what does he do? He sets up in London. Mayfair is the place where Russian oligarchs and billionaire sheikhs strike deals.

The most fascinating and intellectually interesting and challenging business, which is kind of that, in my view, the Champions League of business is finance. That is the lubricant, the fuel which keeps the whole world economy going.

He basically starts brokering investments for people. This is a world of low interest rates, quantitative easing. It's quite hard for people to make a buck, and he turns a lot of heads. His office in Mayfair is on Savile Row and the office is incredible. The penthouse floor, he totally remodels the place. It becomes all black marble, modern art, floor to ceiling wine fridge. A lot of people are bamboozled by the glitz. OK. This guy has some skeletons in his closet. But as the thousand-pound wine is tinkling into their glass, all those concerns seem to melt away.

It has been useful to have an office in London Mayfair the last 10 years to receive and meet clients and investors from all over the world. It is beneficial for a banker, who lends money to a client, to have a relationship and to know firsthand what's going on, what is he thinking, how is he feeling? Does he look good? Does he look confident? Does he look scared? I think all of these soft factors do matter, even in the age of Zoom calls and emails.

Well, money begets money. A billionaire is more likely to talk to someone who he thinks is also a billionaire. So he had this amazing yacht called 'The Global.' It's like 74 metres. It had space for 12 guests.

It got sold a while ago, but when I had a yacht I did use it, again, for meeting people, for relationships.

He was bringing Bruno Crastes on the yacht, the families of Bruno Crastes.

Bruno Crastes is a suave silver fox. It's got this winning smile and this deep Mediterranean tan. Here you have a guy who says, I'm going to take a lot of risks, but I'm going to make you rich.

So Bruno sets up H20 Asset Management, his own firm, in 2010. He took big risks. He used a lot of leverage. He took big bets.

He's someone who held his nerve when things got really tough. That trait has brought him riches, to not go where the crowd goes and the ability to hold steadfast. It served him really well in the time of the financial crisis against all odds. They got seed investment from Natixis and they took off.

His investment philosophy is that risk management and regulation make you cut your positions when they go against you. He says that's when you should hold your nerve. Ordinary savers can put their money in H2O.

I'm Lionel Paillet. I'm French. The money I invested into H2O funds came from savings, and it's essentially family money. When I looked at H2O, I didn't know that company. The performance that was discussed by the H2O from my advisers was exceptional, but also de-risked by the names on the tickets. When you look at Natixis, you look at KPMG, CACEIS, you're like, wow, you feel confident.

Vincent Chailley is the chief investment officer of H2O.

Our strategic positions are doing really well.

He's essentially like Bruno's business partner.

Vincent was the one that first established this relationship with Lars. Some people even said Vincent was besotted with Lars. In 2015, H2O started entering into transactions with Lars Windhorst and related companies. Right from the start it appeared to go wrong.

H2O is called H2O Asset Management because it's supposed to invest in liquid and transparent financial products. What Lars is selling are illiquid investments, incredibly hard to sell and incredibly opaque as well. There's some very complicated transactions. So H2O is often doing something called repo.

These were repurchase agreements where Windhorst companies would sell H2O a bond. That bond would then get repurchased by a Windhorst company. It would go on and on and on and on, happening multiple times - buy, sell, buy, sell, buy, sell. Bonds were not just moving up, down towards H2O and down to Windhorst companies and back. They were also moving sideways from one Windhorst ladder company to another.

So you'd have the holding company of Lars buying bonds related to a lingerie company, for example, from a company that was set to back an oil venture. It's pretty strange. It's a bit like the shell game. You have to follow where all this money is and you can't.

Back then we did a number of transactions which looked to us not too exotic, intra-group activity within companies we controlled. In retrospect, you can look at it and say, was that the smartest thing to do? There was liquidity in our bonds and there was a wider audience of investors trading those bonds. The things we did were not out of the ordinary.

Some of these companies, their funding, it comes out later in court they're making loans to Lars himself. There's a sort of intermingling of Lars's personal finances and the corporate finances. And you got to ask, who's paying for the private jet? Who's paying for the superyacht? Who's paying for the Savile Row office? Who's paying for the wine?

I do not believe that there has been mingling between private and business because everything we have done, I have done, I spent my time on... the last years has been predominantly business.

The real big turning point came in 2017. They started pouring money into Lars Windhorst related companies.

Chailley himself is worried about this. He sends an email to Bruno saying Lars is leveraging himself on our balance sheet, borrowing too much money from us. And he says, we have to do something.

Lars, in his communications to H2O, he's pretty up front. There's emails he sends to Bruno where he says we need to clean the balance sheets of various companies. And he essentially asks H2O can you buy some of these bonds to take them off the balance sheet before a sort of auditor or bank looks at them? If someone asks you to help them clean their laundry, that's probably OK. But someone asking you to help clean their balance sheet should set off a few alarm bells.

At the start it seems like Bruno might be a bit sceptical about Lars. It'd take five minutes of looking on the internet to see if there might be some red flags. He seems to get seduced by Lars.

Bruno wrote to Lars to thank him for a week-long New Year's trip on the yacht, and said it was a family relationship. Lars Windhorst likewise replies, says, it's also, for me, extended family.

And this is when the kind of personal and professional lives of Lars Windhorst and Bruno Crastes really start to intertwine.

It was like Bruno and Vincent were like brothers. And then Lars turns up, charismatic, charming, also very much into risk-taking.

Bruno's always insisted that he thought that there was great upside. By betting this money he could make even more for his investors.

They may have believed that there was value in this. Or there's something else going on, something darker.

I'm Dominique Stucki. I'm a partner in Paris. I've been working on the H2O case for five years now. Some of the underlying transactions that have been made by Tennor with the funding of H2O could qualify as money laundering.

One of the intriguing subplots in this is the link between Lars Windhorst and a bank in Switzerland called Falcon Private Bank and its former chairman, an Emirati businessman called Khadem al-Qubaisi. Falcon Bank and al-Qubaisi were implicated in the 1MDB scandal. This is the Malaysian sovereign wealth fund. Billions of dollars were syphoned off by high level Malaysian officials and their associates and then laundered all over the world. Some of that money went through Falcon Bank. In 2016, Swiss and Singaporean regulators found that Falcon Bank had breached money laundering regulation on some of these trades.

KPMG did an internal investigation into Falcon and found that al-Qubaisi had a fund at the bank which carried out 100 transactions linked to Lars Windhorst. KPMG was concerned that some of them didn't make any economic sense, and that some were used to help Windhorst manipulate prices and benefit him. We can see from emails between Lars and H2O that Lars suggested a number of transactions with Falcon Bank, in some cases even after serious questions were raised about Falcon and 1MDB.

One of the early trades H2O did with Lars involved Falcon. H2O had to chase Lars and Falcon for weeks to settle the trade. It really was a warning sign for trading problems to come. One in 2016 was very convoluted. So Lars asks H2O to do a quick and urgent trade, and it involves bonds and cash moving from one party to the other in a daisy chain.

When Vincent asks why Falcon is selling the bond, Lars explains that the point of the daisy chain is to get money to a third party altogether. Two banks refuse to clear the trade on compliance grounds, leaving them to look for someone else to step in. We asked H2O about these trades but they didn't specifically address them.

12 years ago, 13 years ago, Falcon Private Bank, as a bank, decided to invest into various opportunities we brought to them - securities, stocks, and bonds, not even directly from us, but through the issuing bank who issued those securities. There has been a bank to bank transaction like it is usually being done in the financial markets. And what then the bank does with the securities they have bought on their own book is solely a decision and a discretion of the bank, and nothing where we can be and have been involved with.

We had no direct business relationship with Khadem al-Qubaisi. I cannot imagine, given the nature of how transactions were executed and booked, that a money laundering risk could be something which would face us or them.

Lars has had so many near-death experiences in a corporate sense, and we keep hearing, oh, well, he got out of this scrape because H2O gave him some money. What evidence is there for this?

I spent quite a bit of time pulling together all the amounts, all the different companies that we knew were connected to Lars Windhorst.

We were thinking, you know, maybe this will spit out a few hundred million. If it gets to half a billion that'd be great. That's a nice, sexy round number.

And we got to over 1.4 billion.

We can hardly believe it. One of the most revered fund managers in Europe has bet over a billion euro with a guy with a criminal conviction behind it all. Days before we publish our investigation, Vincent sends an email talking about all the problems with this exposure related to Lars. And he says confidence takes a long time to build, but it can vanish quickly. At this moment he doesn't realise that confidence is about to vanish very quickly in H2O.

It's like a bomb going off. The stock price of H20's parent company, the French bank Natixis crashes. There's questions raised about the liquidity of H2O's funds.

Investors got really spooked and started yanking their money out, around about eight billion euros in eight days.

And in the middle of this, Bruno tries to sort of halt this crisis of confidence. If he talks directly to investors, he can stop the stampede. And there's a couple of video addresses he does.

There was a number of investors who originally pulled money out. There was other investors who were convinced. Bruno, as we understand, really thought this was going to blow over in no time. The second video was less confident.

We never gated, and we will never gate. Volatile periods have always been a great opportunity.

"We will never gate the funds." He will never stop investors from being able to withdraw their money. And it's sort of a magic spell that stops the stampede.

Those messages gave me zero confidence. Natixis was trying to get out of H2O. You've got, like, very tangible information out there. I understand you're trying to calm everybody down, but there is bad news. Why hide it?

Bruno's a risk-taker. He's ramped up all these leveraged positions and he runs into the Covid crash. H2O's funds crash. They crash as much as 50 per cent. And that's really problematic because Bruno has to stay within regulated caps on how much illiquid exposure they have. And as the liquid investments crash in value, the illiquid investments become a bigger proportion of the funds, and you start to breach some of these thresholds.

Again, it's this holding the nerve, going against the grain that everybody else does, which is kind of the tagline of H2O.

H2O's approach is, and has always been always to go where others don't.

Bruno promised to investors that he'd never gate the funds. Regulators effectively do that for him.

And a whole number of funds were frozen. Essentially the investors could not take their money out anymore.

What H2O does, it carves out these Windhorst bonds. It creates a sort of wall around this toxic exposure, and it walls off 1.6bn euros of investors' money and says, we can't give you this back until we get the money back from Lars.

I looked at my bank statements. Every month you just see the valuation of that asset diminishing and diminishing like snow under the sun. It's dark. My opinion about them is really... is very poor, to say the least.

According to the investors who are suing H2O, they've calculated that H2O was exposed by between 2.3 and 2.7 billion to Lars Windhorst related companies. H2O disputes that figure.

This document, which is in minutes by the H2O Executive Committee - you have this sentence at the beginning of the document that states: "Currently H2O Funds' exposure to the Tennor Group, nine entities, amounts to 2.7bn euros."

The French regulator holds an enforcement hearing. H2O gets handed down the biggest fine for an asset manager ever in French history, 75mn euros. He's had to pay a massive settlement to avoid a fine in the UK.

Bruno Crastes was fined 15mn.

But more seriously, they ban him from fund management. Bruno isn't allowed to run funds for half a decade. This is the most serious sanction against a fund manager in France, and it's handed down to someone who once one of its biggest stars. It's an incredible fall from grace.

Vincent Chailley fined three million, a lesser fine because he had raised the alarm. But they continued on. Vincent Chailley remains as chief investment officer. Bruno was re-titled group corporate and strategy director.

It's easy to point at H2O, but that's not the entire story.

We're not only suing H2O, we're also suing Natixis investment managers, KPMG, and CACEIS bank. Natixis is responsible for supervising the management of its affiliates. Relating to internal control, money laundering control, CACEIS banks should have checked whether all the assets in the funds were duly invested in liquid securities. KPMG, the auditor of the funds, also have an oversight responsibility.

At the heart of this there's ordinary saver's money. Billions that were placed with what seemed like a reputable investment firm have sort of gone up in smoke.

The safety valves that are built into the financial system failed to operate properly. Internally in H2O, why did these safety valves not work?

In the case of the FCA, H2O basically tried to cover things up. It submitted false documents to the regulator. It created board minutes for meetings that didn't happen. When they asked them, oh, have you had any sort of personal trips with Lars, they didn't really tell them anything. Bruno had flown around the world and taken these superyacht trips.

When it comes to the FCA, rather than fining them more, they were settling with them to get H2O to pay back investors.

The decision by the FCA states that 250mn euros would be dedicated to all investors, whether they decide to sue or not. H2O has decided to discriminate against those who want to get their money back.

They can either take a relatively small amount of money, these 250mn, divided amongst all these investors, and it's a fraction of what they believe that they're owed, and in return not sue any of the other parties that should have, in the eyes of the investors, had a responsibility from preventing this from happening. Or they can wait, and H2O has indicated that they might have to wait six years.

You need to trust asset managers and the financial markets. As a private investor, I think this really goes against it. It will bring, like, a lot of distrust to the system. And time has passed, so time is not making the story better. It smells worse.

Right amidst the whole scandal, Lars Windhorst announced he was going to buy Hertha Berlin Football Club. He was supposed to have paid a down payment, and he turned to H20 to give them the liquidity and the money to pay. One person he didn't get on with was the president of the club called Werner Gegenbauer.

Well the problem is, is the president's elected by the members. So Lars can't just fire the guy. Lars turns to a team of Israeli private spies. It's founded by former Mossad agents. They run a smear campaign against Gegenbauer.

A campaign that included setting up fake fan forums.

They even go to the extent of having caricatures created of Gegenbauer depicted as the Grim Reaper, the devil. Anyone logging on and seeing this stuff probably think, wow, the fans really have it in for this guy, when really it's a bunch of Israeli private intelligence guys who are pulling the strings. Lars doesn't pay the spies, and the spies end up suing swimming Lars, and Lars has to sell the club in disgrace for a fraction of the money he invested.

Lars later claimed that he asked the Israeli spies to look into Gegenbauer, but he didn't commission the smear campaign.

I had a legitimate reason to ask professionals to help me investigate. What happened with the money I had invested? I now know what they did. I regret this has happened. This is not right and not appropriate.

Lars has had lawsuit after lawsuit, different creditors chasing him through the high courts. He had to testify under oath in 2023, but he already seems to be on to the next chapter. In the summer he hosted this big party, and he introduced Nathaniel Rothschild, who's a scion of one of the biggest banking dynasties in Europe. Rothschild said, oh, I'm going to be Lars' new executive chairman. I'm going to invest some money with Lars.

A testament to him and to his incredible drive. I've never seen anyone who works as hard as Lars. It's quite remarkable.

If I were speaking with Bruno Crastes right now, I would tell him, why on earth did you invest that amount of money in someone that you knew had this history of failures, history of bankruptcies?

My estimated exposure is beyond 1.5mn euros. I really think, like, you've been played. You're just trying to fight back and say, why? And now it's like five years. And we are told it's going to be 11 years. Do I feel great? I feel terrible.

Lars seems to get 2bn euros from H2O in one form or another to fund his ventures. But where does it all go?

One school of thought is that he did invest it, but that the investments went bad. Did the money go into the companies, but not in a liquid and fast enough fashion, therefore killing the companies? Or did they go wandering off somewhere else?

Was it being poured into these businesses or was it helping fund his lifestyle?

The yacht I bought before I met H2O. I cannot be always right. I might spend money where it wasn't justified. We do spend money and do things which are justified, because those activities and those expenditure have created, over the last few years, new opportunities which enabled us to repay certain amounts every year, the last few years.

I think there's a Wild West underbelly in finance. We've got Lars Windhorst as one of the central figures. He's not been chastised by any regulators in this story. If he's not regulated, he can suggest a trade, and then it's down to the regulated company to decide, do they want to play the game or not?

It is my strong desire to rectify any mistakes, to rectify losses created because of these mistakes. I feel sorry. The only thing I can do is, on the one hand to repay and keep repaying H2O, which, again, since 2019, every single year we have done. There will be opportunities in the future to repay people or to rectify losses. The game isn't over. We are maximum at halftime.