Hearing in US lawsuit against AFX gets rescheduled again

Maria Nikolova

The hearing on the sanctions motion launched by the Chapter 11 Trustee of the estates of Avenica and Gallant Capital Markets was rescheduled to November 15, 2019.

The legal action launched by the Chapter 11 Trustee of the jointly administered estates of Avenica, Inc. and Gallant Capital Markets, Ltd. against AFX Capital Markets Ltd., AFX Capital U.S. Corp. and STO Super Trading Online is set for further delay, as shown by the latest filings with the New York Eastern Bankruptcy Court.

On October 22, 2019, the firm representing Esther DuVal, in her capacity as the Chapter 11 Trustee for Avenica and Gallant Capital Markets, submitted a Letter at the Court informing that the hearing on the sanctions motion against AFX is adjourned.

The document states:

“This letter is to confirm the adjournment of the pre-trial conference in the above-mentioned adversary proceeding and the hearing on the Trustee’s sanctions motion, per the Court’s direction, from Thursday, October 24, 2019 at 10:00 a.m. to Friday, November 15, 2019 at 9:30 a.m.”

Let’s recall that, 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.

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 requested that the Court deny the request of the AFX Defendants and proceed with the hearing on the Sanction Motion.

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 said. Joseph S. Maniscalco urged the Court not to give the AFX defendants “another opportunity to make misrepresentations and delay this Adversary Proceeding”.

Judging from the latest Court developments, there are more hurdles for the progress of the lawsuit, as the adjournment marks yet another delay in the proceedings.

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