Nearly two months after an Australian federal court ordered Prospero Markets' closure, the company's liquidators released a report estimating its assets at $4.5 million and $20 million in client trust funds, with an additional $400,000 held in Singapore.

Prospero Markets, incorporated in 2010, evolved through acquisitions and rebranding to become a key player in OTC foreign exchange and derivatives trading by 2020. However, the company's fortunes took a sharp downturn following the prosecutions of its key managers of alleged involvement in a money laundering scheme.

Frozen Assets

The Australian Securities and Investments Commission commenced a formal investigation in November 2023, resulting in the freezing of the company's assets and the suspension of its Australian Financial Services Licence.

Preliminary findings indicated that Prospero Markets had surplus net assets at the time of the liquidation appointment. However, the liquidators faced significant challenges due to limited cooperation from the company's management and incomplete records. Despite these hurdles, they secured access to essential data, including the MT4 trading platform , to verify client claims.

Client trust claims, estimated between $19.1 million and $25 million, represent the majority of the company's liabilities. The liquidators are scrutinizing these claims, including larger-than-expected submissions from Australian clients and claims from Prospero Markets LLC, a related entity now also in liquidation. They believe that some of these claims may not be valid, potentially reducing the total liability to around $19.4 million.

Distributing Funds

The liquidators have implemented a manual verification process and are seeking court directions on handling and distributing trust funds to expedite the process. Assuming limited opposition, the court process is expected to take 6-10 weeks, with distributions commencing shortly thereafter.

Despite the liquidation, Prospero Markets appears to be solvent, with sufficient assets to cover all client and creditor claims. The company's substantial trading losses of $25 million over five years were funded by shareholder contributions. This financial backdrop, coupled with regulatory changes in 2021 that reduced leverage for retail clients, underscores the challenges faced by the company.

The liquidators aim to complete the liquidation process within twelve months, pending court proceedings and further regulatory investigations. Their preliminary review suggests that any residual funds after settling creditor claims will be distributed to shareholders, subject to POCA orders requiring payments to the Official Trustee at AFSA.