Australian Federal Court Finds Collapsed CFD Issuer USG Engaged in Systemic Misconduct

The Australian Securities & Investments Commission (ASIC) announced that the Federal Court ruled that Union Standard International Group Pty Ltd (USG), a collapsed contracts for difference (CFD) issuer, along with its former corporate authorised representatives, BrightAU Capital Pty Ltd (trading as TradeFred) and Maxi EFX Global AU Pty Ltd (trading as EuropeFX), engaged in systemic unconscionable conduct and multiple other legal breaches between 2018 and 2020.

Customers of EuropeFX and TradeFred suffered losses exceeding $83 million due to extensive law violations by these CFD issuers, including systemic unconscionable conduct, misleading and deceptive practices, and the provision of unlicensed personal advice. These companies profited directly from their customers' losses and incentivised account managers to pressure investors to deposit more funds. Their onboarding processes specifically targeted inexperienced or vulnerable customers, many of whom were unaware of the risks associated with these complex financial products.

The Court found that USG failed to meet its general obligation to provide financial services 'efficiently, honestly and fairly' as required by its Australian financial services (AFS) licence, particularly when offering services to customers in China. The Court noted that USG knew or should have known that these customers were likely contravening Chinese law and failed to take reasonable steps to warn them about potential civil and criminal liability.

ASIC Deputy Chair Sarah Court said, “Over a two-year period, USG and its authorised representatives downplayed the risk and overpromised profits of the high-risk CFD products. These entities profited from trades when their customers lost and EuropeFX attempted to argue this was not the case, which the Court firmly rejected.”

Account managers at EuropeFX and TradeFred falsely reassured customers that their interests were aligned. However, the Court found that in 95% to 99% of cases, customers lost money, while EuropeFX and TradeFred took the opposite positions on customer trades, profiting from these losses.

Justice Wigney stated, “I have no hesitation in concluding that EuropeFX’s conduct was so far outside societal norms of acceptable behaviour in respect of the provision of financial services as to warrant condemnation as conduct that is offensive to conscience.”