KordaMentha, the Australian investment and advisory firm, has initiated legal proceedings against the majority of forex broker Arena’s clients who owe the company money. These clients were paid fictitious profits on investments made by the now defunct forex broker, with the total amount coming in at $2.48 million.
Clients Refuse to Cough up Excessive Income
KordaMentha was appointed as liquidator of the New Zealand broker in July, and has since then identified 925 individual clients who are owed money by the broker, a total of $6.96 million, and 96 clients who have received “undeserved” profits. All these clients used Arena’s forex trading website by the name of BlackfortFX.
Arena drew the attention of the New Zealand market’s regulator, the Financial Markets Authority (FMA), earlier this year, as part of a larger crackdown on shady forex service providers, as Finance Magnates reported.
Director, third parties also in liquidator’s crosshairs
How Will Zero-Fee Investment Platforms Impact Traditional Stock Brokers?Go to article >>
The liquidator is seeking the money under the Companies Act with the argument that the debtor clients of the broker have received more than creditor clients would get after the liquidation of the company. This argument means that KordaMentha is effectively trying to get all the money those debtor clients collected from Arena, and not just the excessive profits that they were paid.
Amount Creditors Will Get to Become Clear in 6 Months
In addition to these debtor clients, the liquidator is trying to recover money from the broker’s director, as well as commissions paid by Arena’s management to third parties for attracting new clients. KordaMentha said in an update to the broker’s clients that these legal proceedings should take a few months, adding that it still needs to issue notices to some of Arena’s clients who owe money.
Of all the money due, the liquidator has so far managed to collect just $200,000 in upfront payments and agreements for repayment plans. No timeframe for the conclusion of these collections has been provided.
KordaMentha also added in its update that the size of the compensation creditor clients of Arena will receive remains unclear for now, contingent upon the amount the liquidator manages to pull from the debtors, the director and the third parties who were paid commissions for new clients. It added that this should become clear within six months.