Hipgnosis founder hits out over ex-partners’ court claim

The founder of a music company that holds the rights to songs by Blondie and Justin Bieber has accused his former business partner of using the proceeds of fraud to fund their collapsed venture, court documents show.

Merck Mercuriadis is the founder of Hipgnosis Songs Fund (HSF), a company that buys music rights in the hope of profiting from streaming revenues, and which is now set to be taken over by private equity investor Blackstone in a £1.3bn deal.

However, that company is not Mercuriadis’s first attempt to buy up music streaming rights – or the first time he has used the Hipgnosis name. His former co-founders of a now dissolved business, Hipgnosis Music Limited (HML), have brought a £200m legal action in the high court, claiming that Mercuriadis stole the idea from them and made millions listing it on the London stock exchange in 2018.

Mercuriadis said the claim was “as opportunistic as it is unmeritorious”, in a filing detailing his defence against the claim. He has alleged finance for the first Hipgnosis came from a complex fraud against Swedish pension funds, of which he was unaware.

The claim also names HSF and its investment adviser as defendants. Both are also defending the claim.

The listed Hipgnosis venture has been in turmoil for months after rising interest rates and concerns it had overpaid for rights prompted investors last year to vote against it continuing. That led to a bidding war between Blackstone and a rival, Concord Music.

However, the listed company’s tumultuous time in the spotlight of London’s stock market does not match that of Mercuriadis’s first effort. At a 2014 meeting in Los Angeles, Mercuriadis shared the rights buyout idea with his then friends, producer Aeon Manahan and Swedish musician manager Afram Gergeo.

In return, Gergeo and another businessman, called Emil Ingmanson, would bring financing through an investment fund they had set up. However, Mercuriadis “did not know – but he now understands – that the finance proposed for the new business was likely to be the proceeds of crime”, the filing alleged.

He said he first learned of concerns about Ingmanson in October 2016, when a friend informed him of media reports about the growing Swedish pension fund scandal.

Gergeo and Ingmanson were arrested in England in December 2017. Ingmanson was sentenced to six years and nine months in prison in 2020. Gergeo was sentenced to nine months for “money laundering and fraud offences” in March 2021, according to the filing.

The claim against Mercuriadis said that he took a “maturing business opportunity” and transferred it to a new company. However, Mercuriadis alleged that the arrests and convictions “irretrievably doomed” the original Hipgnosis’s business prospects, making it impossible to raise funds to buy song rights.

A lawyer for HML said the company was “very confident” in its case, and its position is that there was “compelling evidence that Mr Mercuriadis dishonestly diverted the music catalogues business opportunity”.

The lawyer added: “The key components of Mr Mercuriadis’ defence are materially inaccurate and/or irrelevant and designed to divert attention away from his own unlawful conduct.”

A response to the defence is due at the end of this month, but the case may not come to trial for a year or more.

Mercuriadis, HSF and its investment adviser declined to comment.