AFX Capital case in New York faces further protraction
Those hoping to finally see some positive development in the proceedings targeting AFX Capital Markets, a Forex broker that has left its customers and business partners empty handed, will be left disappointed. Several hearings in the adversary proceedings brought by Esther Duval, the Chapter 11 Trustee of Avenica, Inc. and Gallant Capital Markets, Ltd. have passed without AFX bothering to show up.
The hearing scheduled for January 19, 2021 did not even materialize. The conference was adjourned without hearing at the New York Eastern Bankruptcy Court. The case is set for further protraction, with a pre-trial conference set for February 25, 2021. One cannot help wondering whether this conference will yield anything at least of minor importance as a result. The case, launched in April 2018, has thus far produced no positive results neither for Gallant Capital Markets, or for the trustee.
Putting it bluntly, a Cypriot FX firm with dubious reputation has been playing with the US legal system for a couple of years already, changing lawyers, refusing to pay what it signed up to pay, not bothering to participate in hearings… And all the New York courts can do is set and adjourn hearings.
The Complaint alleges that in 2015 and 2016, Gallant Capital Markets deposited about $2.35 million into a Gallant account maintained at AFX. About two weeks before Gallant commenced its bankruptcy case, there was a balance of approximately $2.4 million in the Gallant account at AFX. Back then, Gallant requested several times that AFX returned Gallant’s funds. These requests, however, were disregarded.
The complaint further alleges that AFX withdrew the remaining balance, lacking any authorization and without any basis, in violation of the automatic stay.
In these adversary proceedings brought by Gallant’s Chapter 11 Trustee, the Trustee seeks a turnover of Gallant property and recovery of assets of the Gallant estate.
Given AFX’s actions during these proceedings, including agreeing to a settlement but not complying with the agreement, the Chapter 11 Trustee has also sought sanctions against the defendants. These sanctions include the entry of a judgment against the defendants, whereby they will have to pay $830,000. This is the amount that the AFX defendants agreed to pay the Trustee in a settlement agreement executed and presented to the Court for approval back in 2019.
Esther Duval has reiterated that the AFX defendants have engaged in a manipulative strategy of delay, obfuscation, and fabrication in failing to comply with the stipulation of settlement.