Alpari UK Owes Citi & FXCM $11.4 Mln as Majority Client Funds Pooled

It’s been over a month since the bankruptcy procedure for Alpari UK was triggered, prompting a series of actions by the special administrator appointed for the case, KPMG. The company has been collecting information about client balances after the opened positions of the clients were closed on the 16th of January in the aftermath of the Swiss National Bank shock.

According to the document released by KPMG, Alpari UK had already been in the negative for the year ending on December 31st, 2013, when it suffered losses to the tune of $9.7 million (£6.3 million) on a turnover totaling $86 million (£55.7 million). Non-segregated professional client funds owed to professional clients amounted to $18.9 million (£12.2 million).

Current liabilities of Alpari UK, excluding those to professional clients, amount to $34.5 million (£22.3 million), while the total sum owed to the prime brokers of the company Citi and FXCM is approximately $11.4 million (£7.4 million), of which $8.8 million is owed to Citi and approximately $2.6 million (£1.67 million) to FXCM.

Client Funds

As the special administrator announced earlier in February, the company has been pooling the funds held in segregated accounts, together with all of the Company’s Client Money held in omnibus accounts, designated by Alpari UK as client monies and held at banks or Exchange /clearing houses.

The process is in full compliance with the rules set forth by the Financial Conduct Authority (FCA). Clients who have their funds in segregated accounts are all entitled to a share in the pool on a pro-rata basis.

While the costs of the special administration will be a factor, there is no reason to expect a major dilution in the amount of money which the clients of Alpari UK will be able to receive after the process of special administration is complete.

According to KPMG, “Until the overall total of claims against the segregated pool is established, the amount to be paid to individual clients having a claim against the segregated pool cannot be finally determined.”

Up until now, KPMG has identified balances totaling approximately $99.3 million held in designated client money or trust accounts on the date of appointment. So far, $99.6 million has been repatriated to the special administration estate and is held in client money trust bank accounts. A balance of $1.3 million has yet to be repatriated.

According to the data provided by KPMG, the difference between the balance on appointment and realized is due to exchange rate differences and interest accrued.

KMPG Compensation

The main dilution to the client fund claims is likely to come from the compensation charges which KPMG will receive as special administrator. As of the 13th of February 2015, the company has incurred costs of £1,921,160. These represent 4,144 hours at an average rate of £464 per hour.

Further charges are likely, and may lead to about 10% of client funds going for compensation, however, all deposits of up to £50,000 which are held at Alpari UK are being insured under the U.K. Financial Services Compensation Scheme, hence clients who have deposits below this threshold should receive their money back in full.

As reported by Forex Magnates, the outlining of the process of a client money pool (CMP) and a claims portal will be available as of March 6, 2015, with a meeting for clients and creditors slated for March the 12th.

Joint Special Administrators' Proposals on Alpari UK