Jeffers,a well-dressed man who looks every bit the part of a Martin Place or Collins Street financial executive,spins a trade helping offshore trading scheme operators set up shop in Australia through the Shuriken group of companies.
USGFX’s Hong Kong launch in 2018. From left:Shuriken’s Andrew Jeffers,USG director John Martin,USG chief executive Shay Zakhaim.Supplied
He was being cross-examined in a courthouse on Macquarie Street by lawyers for liquidators piecing together the collapse of Sydney-headquartered trading house Union Standard International Group,or USGFX. The demise of the firm,which specialises in controversial derivatives known as contracts for difference (CFDs),has left creditors nursing $350 million in losses and sparked a hunt for the people who operated this sophisticated scheme to allegedly deceive investors.
Among them are USG’s missing-in-action Myanmar-based chairman Soe Hein Minn and the Taiwanese woman alleged to have been the mastermind of the scheme and the orchestrator of the enormous transfer of funds from client trust accounts in Australia to a new entity in Vanuatu before its collapse – USG’s queen bee,Queena Lee.
As a confident Jeffers took to the witness box,lawyers for liquidators were still not entirely sure whether Lee was a real person or an identity invented by one of the scheme operators to assist with the great getaway plan – hardly anyone had ever spoken to the woman directly and no one had ever met her.
But their lingering doubts were put to bed once Jeffers began to answer questions from David Sulan,the counsel for the liquidators.
Sulan:“And had you met Queena face to face?”
Jeffers:“Yes.”
Sulan:“Can I show you a picture… Does that look to you like the person known as Queena?”
Jeffers:“Yes. It’s a youngish photo;different hair. I don’t have my glasses on,but it looks to be her.”
The USG collapse represents one of the most chilling stories of alleged white-collar crime in Australia in recent years. At its heart are serious regulatory failings,including weaknesses in the Australian financial licensing system that allowed Lee to buy a new licence and continue operations in Australia even in the middle of a major investigation by the watchdog.
USG Australia was part of a global enterprise that showed off its Australian licence to offshore customers.Suppliers
The USG court examinations this month exposed the ease with which allegedly bad-faith operators could obtain licences in Australia to sell high-risk financial betting products to consumers.
The trade in Australian Financial Services Licences (AFSLs) has recently been given fresh attention following,which also held an AFSL it had bought from another trading house.
The examinations also highlighted the role local “fixers” – legitimate accountants or in some cases lawyers – play in helping these largely offshore-operated schemes to set up in Australia where the market for these types of financial betting products is surprisingly deep and the regulatory oversight shallow.
The Fixers
Jeffers,who has not been accused of any wrongdoing and has assisted the liquidators’ investigations,holds a senior role at the Shuriken group of companies,one of the biggest practices in Australia which helps these offshore groups onboard in Australia as well as provide general tax advice and other business advice to Australian small businesses.
These types of fixers can help groups obtain AFSLs,bank accounts,and provide the detailed oversight of the group’s bookkeeping needs and,importantly,oversee the daily reporting to ASIC of client deposits and liabilities.
Australia’s booming market for the high-risk,high-reward products sold by these groups means being a fixer can be a good business.
Groups such as Shuriken also often use their extensive business networks to help put groups in touch with a local chief executive,a responsible manager and directors. These directors and executives help assuage any concerns in ASIC about a group such as USG,which had large operations in Taiwan and was owned by an entity domiciled in Samoa. Sometimes the fixers attend events for the group as well,and in the case of USG,the launch of its Shanghai and Hong Kong offices.
Jeffers told the court he helped Lee set up USG’s Australian operation in 2011 and became a director of the group between 2011 and 2013 before two other Shuriken group staffers took up oversight of the group’s accounting and AFSL requirements.
Australia’s booming market for the high-risk,high-reward products sold by these groups means being a fixer can be a good business – in fact Jeffers told the court that at the time he stopped working directly with USG he was handling 10 offshore clients that were setting up trading businesses in this country.
USG itself was making more than $100 million a year in 2018,even after paying its broker as much as $25 million a month,the court heard. It would also pay $25 million to sponsor then English Premier League team Sheffield United.
But as Shuriken has found with USG – which was the subject of a major investigation by the Australian Securities and Investments Commission at the time of its collapse – some of these groups carry enormous risk not just for customers but for the Australians brought in to help oversee their businesses. This is particularly so if the Australian fixers are unaware that the offshore operator has allegedly bad intentions.
High-risk product,high-risk business
Jeffers might look like the least likely person to have been assaulted after an interview at ASIC’s Market Street offices in the Sydney CBD. The distressing event is described in a 2015 Administrative Appeals Tribunal ruling relating to his unsuccessful request to stay a three-year ban from working in financial services over AFSL breaches by the offshore operators of another trading group,GTL Trade Up.
Jeffers wanted to retain his Certified Practising Accountant (CPA) registration while he sought an urgent review of the ASIC decision. But in the end,he copped the ban for the mistakes of his offshore counterparts and did not work in financial services until May 2018.
ASIC’s building in Sydney.Peter Braig
Lawyers for liquidators briefly touched on the subject during the examinations when they asked Jeffers whether he was a CPA.
“I studied my CPA,and I was a paid up member at the time[he was a director of USG]. The liquidator pressed:“And when did that cease?” Jeffers replied:“Maybe 2016.”
But despite that dust-up,Shuriken continued to help offshore groups set up shop in Australia without any problems – that is until ASIC began to receive complaints about USG in early 2019.
By mid-2019,USG would be the subject of a watchdog investigation. ASIC would later allege its investigation found unconscionable high-pressure sales tactics at two groups operating under USG’s licence,Australian-based Maxi EFX (trading as EuropeFX) and BrightAU (trading as TradeFred).
ASIC also allegedly found USG’s brokers had been selling huge numbers of these high-risk products to people in China where such products are outlawed. The watchdog launched civil action against USG in December 2020 alleging breaches of its licence requirements but would make no allegations against Lee or any of the Taiwanese employees of USG’s owner.
By then,BRI Ferrier liquidators Peter Krejci and Andrew Cummins were starting to uncover the involvement of Lee. The liquidators would also find that a set of books managed by the Australian business was wildly different to creditors claims,and it appeared that the Taiwanese office had been keeping a secret set of books that was kept hidden from the Australian advisers,directors and staff.
Direct impact
These serious regulatory issues at USG would have a direct impact on Shuriken and other advisers and directors brought in to help the group.
ASIC would ban former USG director US-born John Martin from providing financial services for 10 years over his alleged breaches in overseeing USG’s and Maxi’s regulatory requirements.
Others advising or working at USG or Shuriken’s companies,including Jeffers,have spent hours helping liquidators and investigators piece together the scheme. And the examinations would hear lashings of evidence about the unusual practices of USG and its Taiwanese operators.
Highly leverage CFDs allowed retail trader to amplify their gains,but also losses.Louie Douvis
This includes former Shuriken group employee Ilyas Ahmed,who Jeffers said had full carriage of Shuriken’s accounting work for USG. Ahmed would tell the court he was sometimes directed to move money at the ultimate instruction of Lee (via an assistant) despite her having no role within the Australian licensed company he was overseeing and him never having met her.
USG’s handsome chief executive Shay Zakhaim – a man with a deep experience in the CFD market in Australia and Israel – would tell the court Lee had access to client trust accounts and that in 2017 he had had to block her from setting up bank accounts for the company in Thailand under her own name. The incident caused concern with the counsel of liquidators. Sulan asked:“Did that set off alarm bells for you?”
But Zakhaim cooly shot back:“We disagreed and as far as I’m aware it never happened.”
Another Australian fixer,Darren Burns,who was brought in as a USG director in mid-2019 to help steer the business through its issues with ASIC,told the court he was shocked by the practices of USG’s representative Maxi and now regrets working with Lee.
“It used a high-pressure,1980 sales technique with a promise of great riches. I’ve dealt with these sorts of organisations before. Hopefully,we never see him again in Australia,” said Burns,who has not been accused of any wrongdoing and has no link to Shuriken.
The new hive
And for Queena Lee?
It appears she’s still in business in Australia and continues to operate right under ASIC’s nose.
As Burns explained in the examinations when asked about his knowledge of a new entity allegedly associated with Lee:“I would say that pretty much they are running exactly the same business[as USG].”
When asked how he knew Lee was behind the operations,Burns said:“I know who bought the AFSL licence because I sold it to them,and it was predominantly Queena Lee”.
Company records indicate the sale transaction was completed in around April 2020 amid the ASIC investigation but before it launched its action against USG in July.
The records for the new company have no trace of Lee. Instead,they show a new director from Myanmar who appears to reside in Vanuatu,and an ultimate beneficial shareholder with a name that indicates someone might be having the last laugh – Kafka Co. Ltd.
ASIC declined to comment.
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