Clients of foreign exchange trader Prospero Markets likely to get their cash back

Clients of shuttered foreign exchange trader Prospero Markets, whose managers were involved in a huge money laundering sting last year, look likely to get their money back.

A search warrant being executed at Changjiang Currency Exchange in Sydney’s CBD during Operation Avarus-Nightwolf last year.

Clients of shuttered foreign exchange trader Prospero Markets, whose managers were involved in one of the largest money-laundering stings in Australian history last year, look likely to get a large proportion, if not all, of their money back.

Australian Federal Police in November last year raided the offices of Changjiang Currency Exchange, arresting several people in an operation that involved more than 240 AFP members executing 20 search warrants across every mainland state.

Operation Avarus-Nightwolf, as it was called, seized more than $50m worth of property and vehicles, and alleged that the Changjiang Currency Exchange, which operated currency remittance storefronts across the nation, was being secretly run by the Long River money-laundering syndicate, which it said had laundered almost $229m of proceeds of crime over the preceding three years.

The Prospero platform had its accounts frozen the same day the AFP executed its raids, communication sighted by The Australian at the time indicated, although the AFP would not confirm a link between the organisations at the time.

Prospero has since been placed in liquidation, and this week its Australian financial services licence was cancelled by the corporate regulator ASIC.

Prospero, based in Box Hill, Victoria, was an online platform offering trading in financial instruments including foreign exchange, commodity and indices trading, as well as potentially risky contracts for difference which can be highly leveraged.

The platform is understood to have focused on serving Australia’s Chinese community, with the now defunct website also offered in Chinese and its directors largely hailing from China originally.

A liquidator’s report into the business, lodged with ASIC, confirmed that “key management involved in the company, Mr Ding Wang and Mr Ye Qu, are being prosecuted by the AFP for various offences’’.

“We do not make any comment herein in respect of the alleged AFP offences. Our enquiries are focused on the company’s affairs, and primarily, what returns may be available for creditors, which includes clients as trust creditors.’’

The liquidators said that despite not receiving a report on company activities and property from the director of Prospero, and having limited access to its books, they had identified that the company had significant assets.

“To date, we have secured circa $4.5m in company assets and $20m in client trust funds,’’ the liquidators said.

“There are a further $400,000 of company assets held in Singapore, which we are pursuing recovery via legal process in that jurisdiction.’’

The liquidator said clients had lodged proofs of debt totalling about $25m, which was larger than expected. They said they believed the accurate figure for client claims totalled about $19.4m.

“Subject to relevant costs being deducted, the bulk of those client claims should be capable of being discharged from the available trust assets,’’ the liquidator said. “Any residual client claims will be entitled to participate for an unsecured creditor dividend from the company.

“The company’s other liabilities total between $2m to $3.1m. Those claims are represented by ASIC’s petitioning creditors costs of $150,000 to $275,000 and priority claims from former employees of around $1.1m to $1.3m.

“Further, there will be various ordinary unsecured creditor claims, including claims resulting from termination of contracts and leases, in the order of $750,000 to $1.6m.’’

The liquidators said the company appeared to be solvent at the time of their appointment, despite racking up losses of about $25m from FY20-FY24.

“The financial statements indicate that the losses were funded by the company’s shareholders over the years, where they contributed circa $30m to the business,’’ the liquidators’ report said.

“Therefore, assuming that the company can discharge all creditor claims, our preliminary view is that any further enquiries into the business model and losses incurred, are an issue for the shareholders to be explored at a later point, if necessary.’’

The liquidators said Prospero appeared to be acting as part of a group which also had branches in Singapore and New Zealand, and claims totalling $4.9m from clients associated with one of these companies had also been lodged against the Australian entity.

But the liquidators said they believed that the client books were separate and they did not believe the offshore claims were valid.

Clients of Prospero Markets could be paid as soon as November, the minutes of a recent creditors’ meeting show.

A source told The Australian last year that it was common knowledge in the Chinese community that Changjiang Currency Exchange and Prospero were run by the same people.