When Chinese billionaire Xie Zhikun toured Europe in the summer of 2015, his hosts took him to the Aston Martin factory in the English Midlands, to the women’s tennis final at Wimbledon and to dinner at London’s Connaught Hotel, where he was presented with a portrait of himself painted in tea, according to people who helped organize the visit.
Mr. Xie and his chaperones on the trip, executives at London private-equity firm XIO Group, stopped in on companies the firm was buying, according to current and former employees of XIO and an agenda of the trip reviewed by The Wall Street Journal, as well as visiting investment prospects like the sports-car maker they code-named “Project Bond” after its most famous client, the fictional British spy James Bond.
Now, that seemingly friendly relationship is in tatters. The billionaire says it was his money—nearly $1 billion—that seeded XIO and allowed it to buy its first two companies. But XIO wasn’t returning his phone calls, he says. In court papers filed in the Cayman Islands, where companies at the center of the dispute are incorporated, Mr. Xie is accusing XIO executives of a conspiracy to defraud him out of his cash.
XIO says it doesn’t have Mr. Xie’s money and never did. An XIO spokesman didn’t respond to questions about whether any entity affiliated with Mr. Xie has been an investor and XIO has denied his allegations.
‘Xie Zhikun is not an investor with XIO and never has been.’
Mr. Xie is one of the rising number of wealthy Chinese making overseas investments even as Beijing imposes tighter capital controls. He is spreading across the world billions of dollars of the fortune he made in forestry and finance, according to company filings and people familiar with the matter.
XIO, founded in Hong Kong in 2014, has a brief history in private equity but made a splash last year when it bought California-based automotive-research firm J.D. Power for $1.1 billion.
In legal filings and documents reviewed by the Journal, Mr. Xie says he invested a substantial sum in XIO in 2014—and he wants it back.
XIO Chief Executive Joseph Pacini said in an email that “Xie Zhikun is not an investor with XIO and never has been,” and denied his allegations. He declined to discuss the European tour. He said other investors—not Mr. Xie—provided $3.2 billion to the firm in 2014.
Mr. Xie, 56, couldn’t be reached for comment. A Beijing-based spokesman for his company, Zhongzhi Enterprise Group, declined to comment. A spokeswoman for Mr. Xie’s legal representatives in the Cayman Islands at law firm Maples and Calder declined to comment.
The tussle erupted in December. A representative of Mr. Xie sent two letters, which the Journal has reviewed, to XIO’s office in the Shard skyscraper in London. One letter says that in 2014 Mr. Xie provided 5.8 billion yuan—$940 million at the time—to help set up XIO and to fund the acquisitions of two medium-size companies. The letter demands answers about what happened to what it described as Mr. Xie’s “very significant” investment following six months of “unanswered requests for information and documents.” The second letter asks further questions about what happened to Mr. Xie’s money.
Apparently unsatisfied, Mr. Xie in February sued in a Cayman Islands court, accusing XIO Chairwoman Athene Li and CEO Mr. Pacini of receiving “secret profits” from the alleged fraud.
Ms. Li declined to comment.
Mr. Xie, an imposing figure well over 6 feet tall, is known in China for his wealth and philanthropic support for the arts and sciences. His pop-star wife, Mao Amin, regularly sings at shows and on state television, but Mr. Xie keeps a lower profile. In 1995 he founded Beijing-based Zhongzhi, whose website states that it has 1 trillion yuan ($145 billion) of assets. Mr. Xie’s investments range widely and include electric vehicles and trusts that lend money, according to company filings.
Along with J.D. Power, XIO owns German and Israeli assets, according to its website. XIO brought in U.S. investment firm BlackRock Inc. to invest alongside it for the J.D. Power deal, according to people familiar with the transaction. BlackRock declined to comment. In December, XIO said it agreed to buy Meitav Dash, a publicly traded Israeli fund company that manages about $33 billion.
XIO was founded in Hong Kong in 2014 by Ms. Li, a Chinese executive, Mr. Pacini, an American former BlackRock executive, and two other partners. Ms. Li is based in China and Mr. Pacini in London.
Mr. Pacini moved to Asia in 2007 with J.P. Morgan Chase & Co. and joined BlackRock there in 2012 before setting up his own firm with Ms. Li. He said working at J.P. Morgan and BlackRock brought him into contact with the chairmen of big Asian companies eager to invest in new places.
“These organizations are massively flush with cash,” Mr. Pacini said in an interview in September. “They are very hungry for stable investments.”
Mr. Xie says in a court filing in the Cayman Islands that in April 2014 he entrusted Ms. Li and Mr. Pacini to handle his investments in XIO and Dorsey Ventures Ltd., a Cayman corporation.
According to another filing from Mr. Xie in the same court, Ms. Li is the legal owner of Dorsey, and he and Ms. Li have a “share entrustment agreement” that specifies that he is the actual owner. Such agreements are commonly used by wealthy people who want to put money into shell companies without being identified in corporate records. The filing demands that Dorsey make no transfer of shares or payment of dividends without “the order of Xie Zhikun.” The letters Mr. Xie sent to XIO in December also mention Dorsey, saying Ms. Li was supposed to manage its daily operations as well as “deal with the investments of XIO.“
XIO made its first acquisitions in 2015 when it paid more than $300 million, according to people familiar with the deal, for Compo Expert, a German fertilizer company, and $510 million for Lumenis, an Israeli medical-laser company.
That summer, XIO chaperoned Mr. Xie on the tour of Europe and Israel by private jet, according to people familiar with the visit. The trip’s agenda refers to Mr. Xie as an “LP,” which is private-equity parlance for an investor in a fund. XIO staff also accompanied Mr. Xie on shopping trips to stores including Harrods in London, where he spent thousands of dollars, the people say.
During the visit, Mr. Xie was described as “Chairman of XIO Fund Advisory Board” in an email reviewed by the Journal that XIO co-founder Carsten Geyer sent to arrange a meeting with a banker. Mr. Geyer declined to comment.
