A Hong Kong tycoon who lost $20 million in a single day after he trusted the highly-touted abilities of an AI-powered robot hedge fund to manage his investments is now suing the Company who sold him on the idea.
Samathur Li Kin-kan is suing Tyndaris Investments for $23 million for overstating the capabilities of the AI model. Tyndaris is countersuing Li for $3 million in unpaid fees. Tyndaris and salesman Raffaele Costa claims that they never guaranteed that the model will always be successful.
Thomas Beardsworth and Nishant Kumar explore the future of automated money managers in this article published by Bloomberg:
It all started over lunch at a Dubai restaurant on March 19, 2017. It was the first time 45-year-old Li, met Costa, the 49-year-old Italian who’s often known by peers in the industry as “Captain Magic.” During their meal, Costa described a robot hedge fund his company London-based Tyndaris Investments would soon offer to manage money entirely using AI, or artificial intelligence.
Developed by Austria-based AI company 42.cx, the supercomputer named K1 would comb through online sources like real-time news and social media to gauge investor sentiment and make predictions on U.S. stock futures. It would then send instructions to a broker to execute trades, adjusting its strategy over time based on what it had learned.
The legal battle is a sign of what’s to come as AI is incorporated into all facets of life
The idea of a fully automated money manager inspired Li instantly. He met Costa for dinner three days later, saying in an e-mail beforehand that the AI fund “is exactly my kind of thing.”
Over the following months, Costa shared simulations with Li showing K1 making double-digit returns, although the two now dispute the thoroughness of the back-testing. Li eventually let K1 manage $2.5 billion—$250 million of his own cash and the rest leverage from Citigroup Inc. The plan was to double that over time.
But Li’s affection for K1 waned almost as soon as the computer started trading in late 2017. By February 2018, it was regularly losing money, including over $20 million in a single day—Feb. 14—due to a stop-loss order Li’s lawyers argue wouldn’t have been triggered if K1 was as sophisticated as Costa led him to believe.