Nearly two months after an Australian federal court ordered Prospero Markets’ closure, the company’s liquidators released a report estimating its assets at $4.5 million and $20 million in client trust
funds, with an additional $400,000 held in Singapore.
Prospero Markets, incorporated in 2010, evolved
through acquisitions and rebranding to become a key player in OTC foreign
exchange and derivatives trading by 2020. However, the company’s fortunes took
a sharp downturn following the prosecutions of key management of alleged
involvement in a money laundering scheme.
Frozen Assets
The Australian Securities and Investments Commission commenced a formal investigation in November 2023, resulting in the
freezing of the company’s assets and the suspension of its Australian Financial
Services Licence.
Preliminary findings indicated that Prospero Markets
had surplus net assets at the time of the liquidation appointment. However, the
liquidators faced significant challenges due to limited cooperation from the
company’s management and incomplete records. Despite these hurdles, they
secured access to essential data, including the MT4 trading platform, to verify
client claims.
Client trust claims, estimated between $19.1 million
and $25 million, represent the majority of the company’s liabilities. The
liquidators are scrutinizing these claims, including larger-than-expected
submissions from Australian clients and claims from Prospero Markets LLC, a
related entity now also in liquidation. They believe that some of these claims
may not be valid, potentially reducing the total liability to around $19.4
million.
Distributing Funds
The liquidators have implemented a manual verification
process and are seeking court directions on handling and distributing
trust funds to expedite the process. Assuming limited opposition, the court
process is expected to take 6-10 weeks, with distributions commencing shortly
thereafter.
Despite the liquidation, Prospero Markets appears to
be solvent, with sufficient assets to cover all client and creditor claims. The
company’s substantial trading losses of $25 million over five years were funded
by shareholder contributions. This financial backdrop, coupled with regulatory
changes in 2021 that reduced leverage for retail clients, underscores the
challenges faced by the company.
The liquidators aim to complete the liquidation
process within twelve months, pending court proceedings and further regulatory
investigations. Their preliminary review suggests that any residual funds after
settling creditor claims will be distributed to shareholders, subject to POCA
orders requiring payments to the Official Trustee at AFSA.
This article was written by Jared Kirui at www.financemagnates.com.
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