USGFX’s Creditor Claims Exceed $350M, with $8M Available Funds

BRI Ferrier, the liquidator of bankrupt Australian Retail forex broker Union Standard International Group Pty Ltd (USGFX), has released a creditor report update.

Creditor claims exceed $350 million

According to the updated content in the report, BRI Ferrier has now obtained a decision from the Courts that provides clarity on the standing of the various classes of creditors of the company and the available assets. The company has successfully recovered meaningful funds from the Australian held assets, however there are substantial funds which have been handled offshore which they are looking to pursue.

This is a complex Liquidation, involving dealings with parties in multiple countries, and various regulatory bodies. Lodged creditor claims now exceed $350M, and this amount may increase further. It is clear that there have been serious breaches of law and mishandling of client funds historically. BRI Ferrier anticipates that prosecution of certain persons involved may follow in due course.

There are insufficient funds available to declare a meaningful dividend to creditors at this stage, and therefore BRI Ferrier is moving to hold public examinations as they pursue recovery actions for the benefit of creditors. BRI Ferrier anticipates that this Liquidation will continue for some time and will provide further updates as the matter progresses.

Trading and Investor clients are with equal standing

BRI Ferrier filed an application in the Federal Court of Australia on 23 April 2021 seeking directions on various issues, including the treatment of funds recovered in the Liquidation and the different classes of entitlements to the funds. Those proceedings have now been determined, and BRI Ferrier sets out herein a summary for creditors.

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.

Any negative account balances can be set off against positive account balances for Trading or Investor clients with multiple accounts. Any deposits made by Trading or Investor clients into USGFX's trust accounts after 8 July 2020 were made in error and can be returned in full.

Most of available funds to pay creditors comes from taxes refund

BRI Ferrier said that a significant amount of work was undertaken in relation to company tax that was paid to the Australian Taxation Office (“ATO”) in the years prior to their appointment. Their analysis of the historical financial statements indicated that the profit had been dramatically overstated. The effect was that USGFX had incurred significant trading losses and had incorrectly paid the ATO around $6M in company tax between FY2017 and FY2020.

With the advice and assistance of the USGFX's external accountants, the historical income tax returns were recast and relodged, resulting in the recovery of the overpaid tax, plus a minor amount of interest.

There is currently around $8M in available funds, which pursuant to the recent Court orders, are all impressed with a trust in favour of the trust creditors. However, the lodged creditor claims continue to increase, where BRI Ferrier has received approximately $357M to date, of which approximately $349M are from trust creditors.

Whilst a formal adjudication of the claims has not been conducted, there is obviously a substantial shortfall for creditors based on funds to hand and real questions to be answered as to where client funds (in particular investor clients) have gone.

BRI Ferrier to hold Public Examination to progress potential recoveries

With the Trust Proceedings now concluded and funds in hand, BRI Ferrier is shifting their focus to progressing the potential recoveries by holding a Public Examination in Court. Public examinations are a formal process which allow 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.

BRI Ferrier believes there are many parties (including but not limited to directors, agents, advisors and professionals) that should be examined on the Company's historical affairs. BRI Ferrier has engaged lawyers to provide advice and consider the document production and examinee list. The first step to commencing the public examination process is to file an application with the Court, which will then allow them to request the Court to issue notices to parties to produce documents and set dates for Court attendance to be asked questions under oath.

BRI Ferrier intends to provide a more detailed report to all creditors once they have completed the public examination process. As part of the recent orders made by the Court, BRI Ferrier will shortly be issuing correspondence to clients who have deposited funds into USGFX's bank accounts. This will establish the process and timeframe for the return of these funds.