AFX Capital Markets has once again failed to appear at a hearing in adversary proceedings brought by Esther Duval, the Chapter 11 Trustee of Avenica, Inc. and Gallant Capital Markets, Ltd. This is indicated by a minute entry by the New York Eastern Bankruptcy Court submitted earlier today.
Today’s Court filings state that a hearing in the case against AFX Capital Markets LTD., AFX Capital U.S. Corp., and STO Super Trading Online was held on December 1, 2020. There was an appearance by the plaintiff (that is, Esther Duval), but there was no appearance by the defendant – AFX. Let’s note that AFX also failed to appear at the previous hearing held on November 2, 2020.
The hearing is adjourned to January 19, 2021.
Let’s note that, in the meantime, the Court approved an amended Chapter 11 Plan in the Gallant Capital Markets case. The plan mentions AFX in the part related to the events leading to Gallant’s bankruptcy.
“The Debtors’ financial difficulties were caused by a dispute with its main-counter party, AFX Capital Markets Ltd (AFX). AFX was a company registered with the Cyprus Securities and Exchange Commission. The Debtors allege that AFX failed to process Gallant’s redemption request in excess of $2,000,000. As a result, the Debtors allege that Gallant could not provide liquidity services to its clients. Therefore, Gallant ceased trading and filed for Chapter 11 bankruptcy. As of the Petition Date, the brokerage accounts were shut down”.
Let’s recall that the adversary proceedings targeting AFX were launched back in April 2018. 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.