The foreign exchange broker, the, er, that's it... - Part 2
There are more twists to the Equiti Capital row.
Readers might (or might not) recall that back in November last year Betaville noted that The Sunday Telegraph dug out a curious tale involving the foreign exchange broker, which is being is pursued in the commercial courts for £10 million. Below is the link:
https://www.www.betaville.co.uk/news/the-foreign-exchange-broker-the-er-thats-it/
Well, that case centres on allegations that a US investment fund, formerly one of Equiti’s largest clients, had been conducting an alleged Ponzi style fraud. Cue litigation from an investor who lost a chunk of cash in the scheme. The claim - contested obviously - is pretty simple. The claimants says that as the prime broker for the alleged Ponzi scheme Equiti should have been aware of what was going on, and therefore is liable. Equiti's response can be summed up in three words ‘caveat emptor’ and ’nonsense’.
Now, there are more cases involving London brokers that have come to my attention. One involves a group of investors seeking the return of roughly £4m from London and Russia-based brokerage ITI Capital. The claimants say they lost their cash because of negligence and breach of duty by ITI. Unsurprisingly, ITI’s position is pretty similar to Equiti’s - ’nonsense’ etc.
No doubt the wider London brokerage market will be looking with interest at all these claims. Their outcomes could go along way to deciding what liability brokerages have for losses when things go wrong. And don’t forget this is a market where things really can go very wrong - even in the normal course of business. Equiti’s own risk warning disclosure states: “75.33% of retail investor accounts lose money when trading CFDs with this provider”. Ouch.
Of course the various disputes mentioned above may not make it to trial. These things have a habit of settling before they get in front of a judge. Equiti has had a few of these recently. The company’s US subsidiary Equiti US LLC has been hit by three claims over the last couple of years, two from former employees and one from a group of investors. All three cases settled before trial.
Whether the London litigation makes it to trial or not will, unusually, be up to the company’s ultimate shareholders rather than the board. As revealed by one of the FX news websites, Equiti’s Jersey holding company changed its articles of association recently, handing shareholders led by Saudi businessman Abdul Raouf Waleed Al Bitar control over any settlement decisions.
Will there be an equitable ending for Equiti?
Betaville contacted both Equiti and ITI but neither company bothered to respond to requests seeking comment...