The Tower of Panama

Photo from the “Registro Publico de Panama“ website. “Transparence – Quality – Technology”

On November 3, 2014, I released the fourth episode of HFT in my backyard. Back at that time I was still discovering the amazing world of microwave (a technology that seems to be the fastest way to carry data between different distant exchanges) and I was still trying to figure out who were the different competitors in this not-so-secret area. I quickly understood that we have two types of competitors: proprietary firms and/or marker makers like Optiver, Vigilant Global, Jump Trading, and microwave providers like McKay Brothers or Custom Connect – these providers lease their networks to proprietary firms, trading desks of banks, etc. That’s how I came across a pseudo-secret firm located in Panama named Mossack-Fonseca, which is very famous now – and it is well deserved– thanks to the Panama Papers leaks. The Mossack-Fonseca tower in Panama is the place where an off-shore tax haven meets high speed trading.

The Mossack-Fonseca tower in Panama City

In November 2014 I parsed the  French radio regulator website (Agence nationale des fréquences) and I found the different firms I wanted to catch (including their legal postal addresses) but an unknown name showed up: Latent Networks. I checked the public records containing all the French radio operators and I realized the Latent postal address was in Malta – that was quite exotic for a HFT-related firm as most of the other microwave operators (McKay, Custom Connect) are incorporated in the countries where they have activities (The Netherlands, France, Swiss for instance). On the official Malta Registry of Companies I found the firm Latent Networks (incorporated in 2012), I spent a dozen of dollars to buy the “certificate of registration” and I suddenly I jumped from Malta to Panama, as the two shareholders of Latent Networks Limited are a firm named Invest Group Ltd and another firmed named Amicalle Corp., incorporated in Marbella East 54th Street 3A, in the city of Panama, the postal address of Mossack-Fonseca.

So I registered to the Registro Publico de Panama to find more data about this Amicalle Corp., and then I discovered the wonderful and amazing world of Mossack-Fonseca. According to the public data, Amicalle Corp. has two shareholders, Dubro Limited SA and Aliator SA, and different directors. Both Dubro Limitad SA and Aliator SA have the same directors (some are directors of Amicalle too), and both Dubro and Aliator have the same shareholders, Cheswick Inc. and Eastshore Inc, one director (Yenny Martinez) of both Cheswick and Eastshore being a director of Dubro, Aliator and Amicalle. At that point I started to understand the way thousands of firms can hide in Panama behind figureheads/shell companies. 

The dead-end of my investigation was two names, Marta Edghill and Katia Solano, who are policyholders of both Cheswick and Eastshore. If you parse the OpenCorporates website, you will learn that Katia Solano is involved (as director, secretary, etc.) of 14,453 (!!!) different companies incorporated in Panama, while Marta Edghill is involved in more than 8,900 companies. Thats how tax havens work – I assume that managing those thousands of firms involves quite a lot of work (amusingly, when I was watching a TV broadcast two days ago about the Panama Papers leak, the name of one of the Amicalle directors showed up on the screen). When I discovered the world of Mossack-Fonseca, I thought that if a relatively small firm like Latent Networks can be incorporated in Malta with a main shareholder in Panama, imagine the super montages big firms/banks can set up between the different tax havens in the world. Of course, all the firms linked to Amicalle Corp. (including Amicalle) have the same agent, named “BUFETE MF & CO”, and MF stands for Mossack-Fonseca.

Given the montage, in November 2014 I have not been able to find the real names behind Latent/Amicalle; I only found out that there were connections with people from Warsaw, Poland (later I discovered that the United-Kingdom radio regulator website, Ofcom, gives more details about the firms licensing frequencies, and that’s how I found some real names – but not the one I was searching for). After I released HFT in my backyard S01E04, I received a letter from Latent Networks, or more precisely, a right of reply. It must be said that my words about Latent were not really, let’s say, sweet – but this is another story, unrelated with Mossack-Fonseca –, and I thought it was fair to comply with the request and I published the Latent Networks response.

The answer starts: “The Latent Networks team had read the Sniper in Mahwah blog with interest for many weeks. The curious and somewhat eccentric activity of the author provided an interesting view, sometimes more sometimes less accurate, of the market, technology and work that we were deeply involved in.” Latent stated that “from cursory browsing Malta is behind Luxemburg, Cyprus, Holland and Ireland as a “tax heaven in European Union.” (I don’t know if the word heaven instead of haven was ironic) “It is on about the same level as Belgium, Sniper’s home country”. That’s absolutely right, Belgium is a tax haven for some people, mostly the rich French people working in finance, for the TV industry, etc., but I swear that as a French I didn’t come to Belgium to evade taxes. The Latent response confirmed that “the company structure is simple: in Amicale Inc. are the shareholders, physical persons. Latent Network Ltd. is the principal company… Keeping things sandboxed reduces risk to the customer and us. It’s just good housekeeping, not James Bond ”. Fair enough, but in my post I talked about the montages as a “novel à la John Le Carré”.

Unfortunately, if, as Latent stated, “Malta is small, administrative things get done quickly, English is the official language and it has Common Law similar to UK or US which makes international contracts easy; it is a better place than many to start a company that intends to build microwave networks in various European countries”, we sill don’t know why the parent company of Latent is incorporated in Panama. I’m not paranoid at all, but there must be a precise reason why one of the microwave providers operating in Europe needed Mossack-Fonseca at some point (since the “physical persons” Latent talk about are only figureheads, as shown in the diagram below) . The International Consortium of Investigative Journalists (ICIJ) announed that “in early May ICIJ will release the names of the more than 214,000 offshore entities incorporated by Mossack Fonseca and the people connected to them (as beneficiaries, shareholders or directors).” Perhaps Amicalle Corp. will be one of those offshore entities? Perhaps we’ll get more details? Also, it’s important to note that incorporating a firm in Panama, with the help of Mossack-Fonseca, is not illegal per se. When the Panama Papers leak was released, I recall that a month ago I was contacted by a journalist from Malta who was trying to figure out the Malta-Panama connection of Latent Networks (“I was researching two Panama cos and I found your blog; looks like your business tree for Latent could be connected to them”); the request was probably related to the Panama Papers affair. 

On the contrary, other microwave operators are far more transparent. For instance, New Line Networks (aka NLN, the joint-venture between KCG’s subsidiary Geodesic Networks and Jump Trading’s subsidiary World Class Wireless) was incorporated in Belgium on January 6, 2016, according to this public document. The head office address is in Slough, UK (this is the World Class Wireless address in the UK, while the registered office address of New Line Networks LLC in the UK is in Delaware – another kind of tax haven). Why NLN was incorporated in Belgium? This might be explained by the fact NLN is trying to implant in Oostduinkerke (cf. HFT in the Banana Land, Part III). But it’s most likely that NLN did it in order to get back the licences Global Colocation Service (another subsidiary of KCG) owned in Belgium, according to this public document. For once, in a country (my backyard) where there is absolutely no public data on the radio operators, this document is gold as it reveals for the first time the towers where Jump, KCG and now New Line Networks have dishes in my backyard (hourra!)  :

Since the KCG subsidiary Global Colocations is working with New Line Networks, it makes quite a lot of sense that the Global Colocation licences (in Belgium) were transferred to NLN; in the UK, according to Ofcom, the Global Colocation Services UK licences were transferred to New Line Networks LLC on May 5, 2015. But there is some irony here: guess who designed and owned the Global Colocation Services paths in Belgium before they have been sold to KCG? No idea? Latent Networks! (In the UK, the Latent licences/paths were sold to KCG in Septembre 2014, according to Ofcom) This is a so small world. Now I’m wondering why Latent is trying to arrange with Vigilant both in Richborough and Oostduinkerke, as Vigilant is a fierce competitor of New Line Networks there. But this is another story – a story for HFT in the Banana Land, Part IV.