A cyberattack that wreaked havoc across derivatives firms last week has left Andrea Pignataro, the Italian tycoon who heads the software company at the heart of the storm, grappling with something he has avoided for decades: publicity.
(Bloomberg) — A cyberattack that wreaked havoc across derivatives firms last week has left Andrea Pignataro, the Italian tycoon who heads the software company at the heart of the storm, grappling with something he has avoided for decades: publicity.
The former Salomon Brothers bond trader who helped set up ION Trading in the mid-1990s has largely shunned the limelight, rarely speaking at events and never once giving an interview to the English-language media. While ION staff worked around the clock to resolve the cyberattack and reassure clients as their systems were being held to ransom by Russian hackers Pignataro, 52, remained out of sight.
Former employees say the Bologna native’s low public profile is part of his management style, while behind the scenes he’s been the driving force behind a rapid, debt-fueled expansion that’s transformed the Dublin-based company from a fintech startup to key player in the operation of financial markets. Acquisitions over the past 15 years have left the company with debt of around €5.6 billion ($6 billion), largely through leveraged loans, data compiled by Bloomberg show.
Many of those deals have followed a similar pattern in which the takeover is absorbed as quickly as possible with a large portion of employees either leaving or eventually being let go, the former employees and market participants said, asking not to be named discussing a closely-held company.
“Pignataro has made his low profile a signature of his business activity,” said Carlo Alberto Carnevale Maffe, professor of business strategy at Bocconi University in Milan. “But while acquisitions require confidentiality and discretion, cybersecurity is not just a private interest, it is a public good and requires public accountability.”
The attack against ION began on Jan. 31 and affected 42 of its clients. It ultimately forced some European and US banks and brokers to process some trades manually.
The cyberattack has underscored the critical role that the privately-held company plays in the sound functioning of financial markets. Its software is crucial in processing trades between banks, brokerages and exchanges, and in the wake of the attack the top US derivatives regulator warned that the industry’s reliance on third-party service providers like ION is a source of risk.
“All the post-trade stuff — clearing, settlement, margining — is extremely important for financial markets to work smoothly,” said Reena Aggarwal, director of Georgetown University’s Psaros Center for Financial Markets & Policy. That a cyberattack on one software company can cause such havoc in international markets is “really disturbing.”
A spokesperson for ION and Pignataro declined to comment.
Rapid Growth
Pignataro became a better known figure in Italy when ION bought out risk management firm Cerved Group SpA for about €1.9 billion ($2 billion) in 2021, but that’s just one of an estimated 32 acquisitions totaling about €16 billion over the past two decades.
ION borrowed money from banks based on future revenue, a former employee said. Extending the length of its services contracts with clients after acquisitions was one way of doing that, two former employees said, adding that customers were locked in for longer when their deals were coming up for renewal.
In a rare interview with the Italian newspaper Il Sole 24 Ore on Feb. 3, Pignataro said the company’s cash flow is 1.8 billion euros and the group is five times levered.
Most of the acquisitions came from two big buying sprees. The first took place between 2008 and 2013 when Pignataro bought Rolfe & Nolan, a supplier of software to the futures and options industry, FFastFill, a firm that designs and markets trading software, and the electronic trading provider Patsystems UK. And the second was in 2018-2019, when ION acquired trading software giant Fidessa Group Plc and Acuris, the financial news and information company that owns Mergermarket and Debtwire.
Like ION, Bloomberg LP, the parent company of Bloomberg News, also provides financial institutions with execution management solutions, connectivity to electronic markets and trading tools.
In the Il Sole interview, Pignataro described the company as a “hybrid” of a private-equity firm and a more traditional company, with a key difference being that unlike a buyout firm, ION doesn’t usually try to sell the businesses it has acquired.
“We are an industrial conglomerate, but with the financial structure and sophistication of large private equity firms, which are our main competitors when we acquire companies,” he told the newspaper in the interview that took place before the cyberattack but was published after the event.
Salomon Trader
Pignataro helped set up the firm in his mid-20s while working as a trader at Salomon in London, according to UK filings and people familiar with the matter, who asked not to be named because details are private.
He worked for the European fixed-income arbitrage desk, which risked the bank’s capital through high-octane wagers on price discrepancies in similar securities, the people said. The business was iconic on Wall Street, renowned for its money-making prowess — it was expected to make about $1 billion in global annual revenue — and volatility alike. Pignataro, who focused on derivatives tied to interest rates, stood out among junior traders for his drive and analytical skills, the people said.
The desk attracted a certain kind of character. Traders tended to be “mathematically inclined” and relished the intellectual rigor required for their complex bets, according to Eric Rosenfeld, who joined the business in the 1980s after a spell as a Harvard University professor. But they were also ambitious and enjoyed taking large risks, he said. And the London arm of the business that Pignataro joined took plenty, sometimes generating about $400 million of annual revenue, the people said.
“The London market had many more opportunities than the New York market,” said Rosenfeld, who was later among a group of Salomon traders who set up hedge fund Long Term Capital Management. “You had many more bonds of different currencies and you had a more robust opportunity set of types of securities.”
Hedge Fund Collapse
In the mid-1990s, as financial markets became increasingly electronic, the division wanted to improve its technology, the people said. Salomon formed a joint venture with Pisa-based software firm List Holdings that would later become ION Trading UK. Pignataro helped lead the effort and joined the entity’s board, filings show.
Pignataro’s fortunes changed in the late 1990s when Salomon — now under the control of Citigroup Inc. — began to back away from the risky business of fixed-income arbitrage. The decision was hastened by the spectacular collapse of LTCM.
Read More: Long-Term Capital Gets $3.5 Bln Bailout After Losses
He and other traders left the bank and founded Endeavour Capital Management, a London-based investment firm, but by the early 2000s, he was devoting his full attention to ION. He took control of the business around then, filings show, and has run it ever since.
Meanwhile his wealth has skyrocketed, making him one of the richest men in Italy with enough spare cash to invest in a Caribbean island retreat with some fellow tycoons, and own properties in St. Moritz, Switzerland, according to two people familiar with the matter.
Ransom Paid
LockBit, the Russia-linked ransomware group behind the attack, said on Feb. 3 that the ransom had been paid and that the gang provided a decryption key to unlock the compromised computers. ION has declined to comment on the ransom but the company told some clients on Monday that it has rebuilt relevant systems and will relaunch them after carrying out independent security testing.
Craig Pirrong, a finance professor at the University of Houston who has studied financial markets for decades, has heard of ION in conversation “from time to time” and seen the company’s booths at trade shows, he said. He knows “nothing” about Pignataro, he said.
“In finance and trading, you can often remain secretive if you want to, in particular if you don’t have a direct regulatory touch,” Pirrong said. “It’s sustainable as long as everything works. Out of sight, out of mind.”
–With assistance from Katherine Doherty, Ryan Gallagher, Jenny Surane, Luca Casiraghi, Sonia Sirletti, Laura Benitez and Rob Dawson.
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