AFX should not be given another opportunity to make misrepresentations, according to Chapter 11 Trustee

Shortly after counsel for AFX Capital Markets Ltd., AFX Capital U.S. Corp. and STO Super Trading Online filed a Letter with the New York Eastern Bankruptcy Court, depicting difficulties in contacting their clients, a representative of Chapter 11 Trustee of Gallant Capital Markets submitted a response to the Letter.

Let’s recall that this action has been brought by Esther DuVal, in her capacity as the Chapter 11 Trustee of the jointly administered estates of Avenica Inc. and Gallant Capital Markets Ltd. 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.

On October 15, 2019, the Counsel for AFX admitted that they had been unable to reach AFX or its officers either through email or phone due to the administration and regulatory proceeding. The defendants’ counsel asked the Court to hold in abeyance their reply to the Trustee’s motion for sanctions.

On October 16, 2019, Joseph S. Maniscalco, representative of the Trustee, submitted a response to the Letter filed by AFX’s Counsel. The Trustee requests that the Court deny the request of the AFX Defendants and proceed with the hearing on the Sanction Motion. The hearing on the Sanctions Motions is scheduled for October 24, 2019 with responses due on October 17, 2019.

The request by the AFX defendants, according to the Trustee, is only further proof of the delay tactics and bad faith behavior by AFX that has plagued the proceedings (for instance, the multiple misrepresentations to Trustee’s counsel and the Court about the pending payments under the stipulation of settlement and the current status of AFX defendants).

“Upon information and belief, counsel for AFX Defendants have known for months of their clients’ alleged shutdown, but failed to advise the Court until now”, the Trustee’s representative says.

Joseph S. Maniscalco urges the Court not to give the AFX defendants “another opportunity to make misrepresentations and delay this Adversary Proceeding”. According to him, granting a status conference and holding their response in abeyance will only reward the AFX defendants for their inappropriate behavior.

Accordingly, the Trustee asks that the request be denied.