Israeli Broker USG Capital Reaches the End of the Road

USG Capital was not able to retain employees, clients and investors after portfolio management allegations by the ISA.

When the Israel Securities Authorities (ISA) got a mandate from legislators to regulate the online forex trading industry in Israel, most hoped that it would bring order to the market and create a safer environment for traders and firms alike. However, some feared that the ISA would use its new powers to regulate brokers out of existence, and it now seems that these fears were not without basis.

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The district court in Tel Aviv has just issued an order to appoint a liquidator to USG Capital this morning after the company reported that its debts now dwarf its available assets. According to the court documents seen by Finance Magnates, the catalyst for the sudden downturn in the state of the firm is the direct result of the actions of the ISA.

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USG Capital’s representative explained to the court that despite its temporary ruling against the ISA, allowing the broker to offer platforms that support algo trading without it being considered portfolio management, the damage to its reputation was critical. “Since March the firm did not get any calls. Employees broke down and quit. It reaches a point where the company had no activity. No employees, no investments, no operations.”

The lawyer described that USG Capital was in state of limbo due to not getting any answer from the ISA regarding its license application. Investors were interested in supporting the brokerage but wanted to wait until the legal standing was finalized. He said that USG Capital tried its best to stay in business in anticipation of the license decision, but it never came.

Back in December 2015 a class action lawsuit was filed against USG Capital – Israel for a total of 70 million NIS (approximately 18 million USD) at the Tel-Aviv District Court, on the basis of unlicensed investment activities. In addition to the local firm, the class action suit targeted International USG Capital Ltd., USG’s owner Atlantic Brokers, and Tomer Sinai, a major shareholder of all of these.

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