AFX counsel says: “We find ourselves in a quandary”
“We find ourselves in a quandary with no communication from our client”, says the legal representative of AFX in a US lawsuit brought by the Chapter 11 Trustee of Gallant Capital Markets.
The US proceedings against AFX Capital Markets Ltd., AFX Capital U.S. Corp. and STO Super Trading Online brought by the Chapter 11 Trustee of Gallant Capital Markets appear to be facing additional difficulties as indicated by a Letter filed by the defendants’ counsel with the New York Eastern Bankruptcy Court.
AFX’s counsel says she is unable to contact the defendants following the suspension of their CIF license by the Cypriot regulator and the entry into administration of AFX Markets in the UK.
AFX’s counsel says:
“We have been informed by the administrator’s office that the operation has been shut down and that the administrator has taken control of the premises and the company’s servers. We have been unable to reach AFX or its officers either through email or phone due to the administration and regulatory proceeding…”
The AFX counsel admits that the recent developments are putting them in a difficult position given that a reply is expected to the motion for sanctions filed against AFX by the Chapter 11 Trustee of Gallant Capital Markets in late September.
“We find ourselves in a quandary with no communication from our client yet a deadline to respond to the Sanctions Motion”, the AFX counsel says.
On October 24, 2019, a hearing is set to be held before the Honorable Elizbeth S. Stong, United States Bankruptcy Judge, Eastern District of New York, on the motion of Esther DuVal, solely in her capacity as the Chapter 11 Trustee of the jointly administered estates of Avenica Inc. and Gallant Capital Markets Ltd., seeking the entry of an Order for a judgment against the AFX defendants.
The Chapter 11 Trustee is seeking sanctions and fees against AFX for engaging in bad faith and injunctive relief.
Under the Complaint against AFX, throughout 2015 and 2016, Gallant deposited approximately $2.35 million (for its benefit) into a Gallant account maintained at AFX. Within the two-week period prior to Gallant’s commencement of its bankruptcy case, there was a balance of approximately $2.4 million in the Gallant account at AFX. Around that time, Gallant made multiple demands upon Defendants for the turnover of Gallant’s funds—all of which were disregarded.
Nevertheless, AFX withdrew the remaining balance, without authorization and without basis, on the Filing Date—in violation of the automatic stay. This case involves core issues whereby the Trustee is seeking a turnover of Gallant property and recovery of assets of the Gallant estate, and enforcement of the automatic stay.
