USGFX bankruptcy update: $357M in claims, just $8M in funds
The administrators for bankrupt Retail FX broker Union Standard International Group Pty Ltd, which operated the USGFX.com brand in Australia, have issued what amounts to the first real update on their efforts to recover funds for former clients and creditors of USGFX since September 2020. USGFX went bankrupt in mid 2020, its controlling shareholder Soe Hein Minn went missing, and administrators have been left trying to sort things out while clients and creditors have been waiting.
In the last update nearly a year and a half ago, administrators-turned-liquidators BRI Ferrier outlined what was an absolutely bizarre story. Beyond finding several million dollars in legitimate client deposits with then ASIC-licensed USGFX, there were tens of millions of dollars in claims made by a group of creditors who said they invested in a financial product offered by USGFX that paid a monthly interest return of around 0.8% per month – much better than the 0% offered by most banks worldwide at the time. The product, known as U-Plus, was promoted predominantly in mainland China and Taiwan quoting the company’s AFSL on the offer documentation.
Well it turns out that $349 million (!!) of such claims have been made against USGFX to BRI Ferrier, a staggering number considering that this was a relatively small/mid sized broker doing about $25-30 billion per month in trading volume on legitimate client deposits in the $6-10 million range. Combined with about $8 million in client account claims, total claims against USGFX now total $357 million.
BRI Ferrier stated in their current update that there is currently around $8 million in available funds to pay all creditors (including former clients), most of which comes from a $6 million refund the administrators received from the Australian Taxation Office from previously overpaid taxes.
So what comes next for USGFX clients and creditors?
Well, more waiting.
Since there are insufficient funds available to declare a meaningful dividend to clients or creditors at this stage, BRI Ferrier is moving to hold public examinations as it pursues recovery actions for the benefit of creditors. The administrator anticipates that this will continue for “some time”. Public examinations are a formal process which allow the Liquidators to compel relevant parties to produce documents and ask questions under oath. The outcome is that evidence is gathered which can then be used to pursue recoveries via litigation (or other means) and/or prosecution of parties involved.
A court decision handed down in November has ordered that both Trading and Investor clients are the trust creditors of the company, with equal standing, such that they are entitled to a pro-rata distribution of any surplus trust assets, after costs. Also, any Trading or Investor clients with an account balance of AUD$50 or less are not entitled to participate in any distribution.
What else is BRI Ferrier doing for creditors?
The obvious answer to that, beyond substantiating the huge amount of creditor claims, is trying to increase the $8 million pool of funds available to return to clients and creditors, even though at this stage it looks like that return will be just pennies on the dollar.
BRI Ferrier said it is continuing to pursue the Money Processors who held the company’s funds. Unfortunately, the majority of the offshore Money Processors have been uncooperative to date, in particular UPay and TVPay which apparently is controlled by Soe Hein Minn – and may in effect be a sham. Regardless, BRI Ferrier has sought recoveries, including participating in an international arbitration process with one of the parties.
The administrator is continuing to explore a possible recovery in respect of settlement monies paid out to former clients of Maxi EFX Global AU Pty Ltd (trading as EuropeFX) and BrightAU Capital Pty Ltd (trading as TradeFred), the company’s former Client Authorised Representatives. In addition, there are outstanding client complaints that are being investigated in respect of potential external funding.
As we previously reported, the administrator has engaged a private investigator to assist in locating key individuals/parties located offshore – namely Soe Hein Minn – in particular in Myanmar and Taiwan. These investigations are ongoing, but BRI Ferrier noted that they have been hampered by the political unrest in Myanmar and the COVID-19 pandemic.
The administrators added in its remarks that it is clear that there have been serious breaches of law and mishandling of client funds historically at USGFX, and that they anticipate the prosecution of certain persons involved.