- ASIC says complaints indicate at least $138 million was put into products investors believed came from MGF Capital’s corporate authorised representatives and cannot be withdrawn.
- Main Group FX held MGF Capital’s authorisation from February to December 2023, ASIC’s register shows, and 13 investors known to the ABC lost more than $2 million when it vanished.
- Main Group FX’s former chief executive Karim Farag appears on a 2024 Israeli counter-terrorism financing list of crypto account holders, the ABC reported, and MGF Capital denies any due diligence failure.
The Australian Securities and Investments Commission (ASIC) is investigating Sydney licensee MGF Capital over fears that products sold under its licence by authorised representatives have cost investors up to AU$138 million (US$96.5 million).
ASIC confirmed the investigation to the ABC, which published its findings on Wednesday. The regulator also confirmed the investigation to Financial Standard. It is examining whether oversight, due diligence and compliance failed, and whether those representatives sold retail services under a wholesale-only licence.
ASIC is concerned many investors may have been exposed to significant financial losses and is examining whether appropriate governance, compliance and oversight arrangements were in place.
ASIC MGF Capital has held Australian financial services licence 421246 since 2012 and registered the Trade Prime business name in June, ASIC’s registers show. Its sole director is Matthew Starkey, a former Goldman Sachs trader. The ABC counted 136 representatives authorised under the licence, and the register shows appointments as recent as August.
Read more: Australia Opens Consultation on New Crypto Tax Reporting Laws
Main Group FX Under the Licence
Main Group FX held that authorisation from 23 February to 8 December 2023, the register shows. It claimed to trade oil and gold futures with algorithmic software. By the end of 2023, its monthly dividends had stopped and withdrawals failed, the ABC reported.
Thirteen investors known to the ABC lost more than AU$2 million (US$1.4 million). One of them, Perth retiree Jean Giles, sold her home after losing AU$176,000 (US$123,100).
Karim Farag, Main Group FX’s former chief executive, appears among 599 names on a 2024 order from Israel’s National Bureau for Counter Terror Financing, the ABC reported. The order alleged the account holders may have funded Hamas through Dubai Company for Exchange and listed Farag’s Binance account details. The ABC said the extent of his involvement is unknown.
The US Treasury sanctioned the same company, listed as El-Kahira for General Trading, on 23 July this year over Hamas money transfers and underground banking in fiat and crypto.
Farag told the ABC he has nothing to hide, would cooperate with any authority and has received no court order, summons or regulatory notice.
MGF Capital had cancelled its Australian Financial Complaints Authority membership by January 2024, as wholesale-only licensees are permitted to do. Giles and others were too late to complain, and some are weighing a class action. AFCA said it cannot compel a firm that is not legally required to join, and this month it opened to digital asset disputes where the provider is a member.
It added that Main Group FX was authorised for wholesale clients, while the victims would count as retail. Starkey helped run Mine Digital, the defunct crypto exchange whose former chief executive was charged with fraud in 2024.
Related: Crypto Security Firm Says US$1.18 Billion Was Stolen in Third Quarter
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