Money.Net files Chapter 7 bankruptcy amid lawsuit

​New York-based Money.Net, the market data workstation once touted as a startup to rival Bloomberg, has filed for Chapter 7 bankruptcy protection, following a judgement in an ongoing lawsuit from investors alleging financial mismanagement, WatersTechnology has learned.

Unless the company can reach a deal with creditors, it is likely to be wound up. Chapter 7 prevents those owed money by a company from collecting or demanding payments owed to them, or initiating lawsuits while the petition is in effect. Firms that file for Chapter 7 protection are appointed a trustee, which arranges a meeting between the company and its creditors, where the company must answer questions about its condition. In a Chapter 7 case, the trustee will typically liquidate a company’s assets to pay creditors. As a result, many companies don’t emerge from the Chapter 7 process.

The Chapter 7 petition was filed in the Delaware Bankruptcy Court on April 15 by Matthew Ward, a partner at law firm Womble Bond Dickinson, based in Wilmington, Delaware. Since the filing, the court has set a deadline of April 30 for the company to submit information, and has scheduled a meeting of creditors for May 20.

The company often touted its data workstation as an alternative to premium terminals, but for a fraction of the price. The vendor charged $185 per month, which included real-time US equities (though additional exchange fees may apply) and real-time currencies data, cryptocurrencies, and end-of-day data for international equities and commodity futures. The platform also offered newswires, charting, screeners, fundamental data, corporate actions data, Securities and Exchange Commission (SEC) filings, and various alerts and indicators.

But the platform’s low price point may not have been enough to fund the vendor’s big expansion plans or senior hires, which sources say left it unable to pay suppliers. Under the leadership of Morgan Downey (pictured), who joined the vendor as CEO in 2014, Money.Net embarked on a series of ambitious expansions to upgrade the platform, including adding new content and tools—from cryptocurrencies to a proprietary artificial intelligence (AI)-generated news service and integration with quant tools—and partners, such as an alliance with OpenFin to broaden its exposure, making itself available via Symphony Communication Services’ platform, and joining LPL Financial’s partner program.

However, these efforts failed to generate real traction for the business, and trying to expand the offering left it “one mile wide and one foot deep,” says an executive at a data vendor, and “under serious pressure,” says an executive at a second data vendor.

Dan Connell, managing director of Greenwich Associates and former president and CEO of data vendor Interactive Data Real-Time Services, says he’s not shocked by the situation. “The data vendor business is quite an expensive undertaking when you look at the costs of data aggregation. And Money.Net seemed lost in the space between retail and institutional. It seems they had a hard time conquering the retail/financial advisor market with the existing competition of systems that are certainly good enough for that market. And they pursued the content need for institutional but—even if you can assume their quality was good—the competition with Refinitiv and Bloomberg is just too much for someone like Money.Net to overcome. I can’t see a firm replacing one of the major vendors with them.”

And its senior appointments didn’t last long term: Downey, who previously served as global head of commodities at Bloomberg, and earlier in his career ran trading desks at Citibank, Bank of America and Standard Chartered, enlisted former Bloomberg execs to help boost the platform’s presence. Included was Norman Pearlstine, former Bloomberg chief content officer, who was also editor in chief at Time magazine, and a senior advisor to the Carlyle Group. Pearlstine joined Money.Net as chief information architect to oversee the AI news initiative in September 2016, but left in early 2018.

In August 2017, the vendor hired Stefanos Daskalakis as chief product officer. Daskalakis, whose career included a seven-year stint at Bloomberg as global business manager, left Money.Net after less than a year in June 2018. In 2015, Money.Net hired Alina Sullivan, a former senior salesperson at S&P Capital IQ, TheMarkets.com and Thomson Financial, as global head of sales. Sullivan joined Gartner as client director in April 2019 and does not list Money.Net on her LinkedIn profile.

Avoiding court

The Chapter 7 filing follows a February judgement in the Supreme Court of the State of New York opening the company up to a potential trial as the result of a lawsuit filed by a group of investors in the company, attempting to reverse a recapitalization conducted in 2012 by then-CEO H.L. Van Arnem and CFO Janet Christofano, which the investors say was conducted improperly.

According to the lawsuit, which the investors originally filed in 2014, Christofano had stated previously in a deposition that “prior to the recapitalization, the company had declining revenue and a stale product,” and that the purpose of the recapitalization was to incentivize herself and Van Arnem to stay at the company, and to clean up its capital structure. The investors allege that Money.Net did not explain that the bulk of the equity transfer would go to Van Arnem, Christofano, and an investment vehicle controlled by Van Arnem, or that the decision concerning recapitalization and distribution would be approved by the company’s board, which comprised Van Arnem and his mother—neither of whom could be described as “disinterested” parties, according to the judgement. Both Van Arnem and his mother died before the judgement was given in February.

Image at top of the page is of the Money.Net HTML5 workstation.