IronFX unpaid tax and corporate debts

IronFX’s $1.6 million unpaid tax, $1.5 million corporate debts and $564,000 Chinese lawsuit over withholding funds another obstacle to Nukkleus proposals

The pie in the sky proposals by IronFX and Emil Assentato’s Nukkleus to conduct a reverse merger and list on NASDAQ are becoming even more unlikely as SEC notes unpaid tax to Cyprus tax authorities, debts to another brokerage, and Chinese civil lawsuit over withholding client funds whilst claiming abusive trading

Following reports during this summer that FXDD may be merging with IronFX, and FinanceFeeds analysis that this is very unlikely to be conducted, FinanceFeeds has embarked on extensive research into the matter and can categorically confirm that there is no proposed merger between the two companies, and neither will be listing, singularly or via a merged entity, on NASDAQ as a public entity.

The many reports which emerged, most of which were PR noise, were not researched in any detail thus the filing which was made to the Securities and Exchange Commission (SEC) in the United States which detailed that IronFX CEO Markos Kashiouris, as well as company lawyer and IronFX shareholder Peter G Economides, and Efsthasios Christophi, a further director of IronFX have joined the board of directors of Nukkleus which is owned by New York-based racing driver and FXDD major shareholder Emil Assentato.

Chairman of the North American division of Swiss interdealer broker Tradition, Mr. Assentato is a major shareholder of FXDD, and any claims by any parties that FXDD and IronFX would merge as a result of the interest in IronFX showed by Mr. Assentato were dispelled following FinanceFeeds discussion with FXDD senior executives on the matter.

It was made clear to FinanceFeeds by FXDD that whilst Mr. Assentato is looking at other investments and potential strategies, FXDD itself at this point is not merging with anyone.

FinanceFeeds spoke to senior executives who are privy to commercial information surrounding a filing that was submitted to the Securities and Exchange Commission (SEC) last week, as well as a previous filing stating that both entities were considering methods by which they could consolidate operations and potentially list, however this has gone nowhere.

It may well be, however, that the proposed merger between Nukkleus and certain assets of IronFX may not go anywhere either, as FinanceFeeds has obtained official documents relating to the proposed merger that state that IronFX has pending lawsuits and an outstanding tax liability.

On June 3, 2016, the Securities and Exchange Commission, whose approval would be required in order for Nukkleus to proceed with any acquisition of IronFX assets, was made aware in writing, and has subsequently included in the regulatory documentation relating to this case, that IronFX Global Limited is a party to the civil actions no. 204-368/2015 pending before the District Court of Limassol.

The said civil actions were filed by Chinese clients of the Company on 22 January 2015. The said clients who have been identified as abusive traders are claiming against the Company damages for breach of contract for the total amount of $1,258,457.30.

It should be noted that the clients filed their statement of claim late in 2015 (more than 10 months after the proceedings were filed). Early in 2016, 72 clients out of 165 sent instructions to their attorney to withdraw the proceedings they filed against the Company. The total amount claimed by the clients who have sent such instructions amount to $564,849.54.

The SEC is also aware that IronFX Global Limited reached a settlement with a major institutional liquidity provider following proceedings that were issued as a result of the SNB event of January 2015 by virtue of which IronFX agreed to pay the liquidity provider the amount of £2,500,000 in twenty five equal instalments of £100,000. The remaining outstanding amount stands at $1,575,000.

Additionally, IronFX has employment-related tax obligations with the Cyprus Tax Authorities of approximately $1.6m, including a tax settlement agreement, which is also an aspect that the SEC has knowledge of.

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Not only did Chinese IBs generate a massive media campaign, but they have also taken their case to court

Bearing these matters in mind, it is very unlikely that the SEC will allow this transaction to proceed, let alone any reverse takeover and public listing.

Public relations, increasing brand awareness and attempting to rectify a tarnished name by going down the route of associating said brand with the ability to list publicly on NASDAQ is a completely different thing to actually being able to successfully do so, bearing in mind that thus far, absolutely no retail FX firms have listed on NASDAQ.

In late 2014, IronFX issued a press release stating that had intended to file an initial public offering (IPO) in New York, with a view to raising $800 million, however whilst this was published in the Wall Street Journal as having been a confidential filing, it did not proceed.

Noted within the IPO documents at the time was a series of important points with regard to the business model employed by IronFX, largely points which have been at the center of very high profile reports in many media sources across the world, including terms and conditions which label clients as abusers of bonus conditions, alleged non-payment of introducing brokers in China, and an internalization of over 90% of all order flow.

As far as any aspirations toward listing on NASDAQ are concerned, the admission rules are very stringent indeed. Even if the SEC permits the merger between Nukkleus and IronFX, any admission of a pink sheets-listed firm that has merged with a firm that has ongoing lawsuits and unpaid tax obligations is very unlikely.

NASDAQ stipulates “Subject to such exceptions as may be explicitly provided elsewhere in the NASDAQ Rules, no person shall become associated with a NASDAQ member, continue to be associated with a NASDAQ member, or transfer association to another Nasdaq member, if such person fails or ceases to satisfy the qualification requirements established by the Nasdaq Rules, or if such person is or becomes subject to a statutory disqualification; and no broker or dealer shall be admitted to membership, and no Nasdaq member shall be continued in membership, if any person associated with it is ineligible to be an associated person under this subsection.”

NASDAQ was a pioneer in the electronic trading world, having began its operations in 1971 and has an emphasis on transparency and is subject to America’s focus on customer wellbeing. Being responsible for the investors that list stock on its exchange, it is a very experienced operator of electronic markets and therefore has one of the strictest due diligence procedures in the world for firms wishing to list their stock.

Bearing this in mind, there is no way at all that either IronFX or FXDD, individually, as a merged entity, or by purchasing a listed entity would ever be able to list on NASDAQ.

The SEC’s verdict has not been reached at this juncture, however with these matters considered, it is highly unlikely that any proceedings will follow.

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