The following story by Laura du Preez appearing on a South African financial services website, Personal Finance, published just yesterday makes interesting reading in light of FXCM's recent initiative to help Refco traders recover their losses. Was (Is) the Leaderguard Recovery Unit interested in assisting defrauded traders or just protecting their own bippies?October 14, 2006 - Personal Finance - The Leaderguard Recovery Unit was a loose affiliation of brokers who represented investors in the failed foreign currency trader, Leaderguard Spot Forex, and these brokers were funding the unit's efforts to recover money for investors.
Following the appointment of a liquidator for Leaderguard Spot Forex, the unit essentially ceased operating at the end of last year, André Matthews, the chairman of the Leaderguard Recovery Unit, who is also the chief executive officer of the Avocado Group of companies, says.
The Avocado Group consist of an asset manager, Avocado Investment Managers, and a distribution arm, Avocado Distribution Services. The company also sold investments into Leaderguard.
In recent rulings against brokers who assisted investors to invest in Leaderguard Spot Forex, the Ombud for Financial Services Providers, Charles Pillai, questioned the legal status of the Leaderguard Recovery Unit. He noted with "alarm and discomfort" that the unit had written to investors in the failed foreign-currency scheme warning them to contribute to the unit's costs.
Pillai first questioned the status of the Leaderguard Recovery Unit in his ruling against Wilma Willemse in August. In a ruling this week against Durant van Zyl, Pillai again questioned the role of the unit.
Matthews says although the Leaderguard Recovery Unit is no longer playing an active role, he has been appointed to represent more than 70 percent of the investors who invested in Leaderguard Spot Forex.
Matthews says the Leaderguard Recovery Unit had no legal status and was a group of brokers who had decided to pool both their efforts and resources to ensure the recovery of their clients' investments.
The brokers who advised clients to invest in Leaderguard Spot Forex were conned by the foreign currency trader, Matthews says, but, out of self-respect, they accepted responsibility to assist in the recovery of the lost funds and were contributing to efforts to recover investors' lost funds.
The letter Pillai referred to in his ruling was more than a year old and Leaderguard investors have, in fact, never been directly called on to contribute to the recovery unit's activities, Matthews says.
Before a liquidator, who had investors' interests at heart, was appointed for Leaderguard Spot Forex, the brokers funded both a legal team and forensic auditors in Mauritius, he says.
"At a point in time, a number of brokers had failed to contribute to this endeavour and a letter was written, as a 'shock instrument', to the investors advising them of this fact. In addition, they were advised that in the event of their broker/s not contributing, then ... the investors were to be asked whether they would be willing to contribute. This, however never materialised, given the fact that the brokers then provided the necessary funding," Matthews says.
If the initiative taken by the referring brokers was to protect their bippies, it has was apparently a futile effort. The Ombud for Financial Services Providers has ordered yet another broker to repay a couple who followed his advice to invest more than R870 000 in the now-collapsed Mauritius-based foreign currency trader Leaderguard Spot Forex. See Laura du Preez's follow up article. It was also published yesterday.
For the complete text of the first article see Broker 'Unit' Claims It Was Looking Out for Investors. To read about FXCM's involvement in the Refco case read Is FXCM Trying to Avoid a Silver Bullet?.
A special thanks goes out to Longfellow, one of The NDD Forum's more prolific contributors for bringing this story to my attention.
Recommended Additional Reading
Think You've Been Trading the Forex? Think Again
Advantages and Disadvantages of Non-Dealing Desk Trading
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