WorldSpreads payouts to clients delayed to September

As we reported earlier, WorldSpreads held its initial creditors meeting yesterday in London. And while many creditors – both former trading clients and corporate creditors – were hoping for news on a quick resolution to the monies owed, as well as information on what happened and whether or not anyone will be formally charged with wrongdoing, there were few answers to be had.

The main disappointment was that it will be at least until September, and possibly later, before clients can expect to begin to receive at least some of their money back, as reported by blog Worldspreadsheist, which is trying to organize clients to take action to get the refunds sooner. After those payouts are made, the FSA’s Financial Services Compensation Scheme (or “FSCS”) will pay up to £50,000 of additional losses per client. Less than 100 ex-clients are actually owed more than £50,000.

There was also no news regarding potential charges of wrongdoing which could be brought against former members of WorldSpreads management.

A few other nuggets of information learned include:

  • WorldSpreads’ special administrator (KPMG) has racked up nearly £1 million in fees so far, or nearly 10% of the money expected to be available for creditors.
  • The special administrator still expects clients to receive just 30-35% of amounts owed (before factoring in any FSCS compensation.
  • KPMG is planning on going after certain wealthy “high-roller” former clients of WorldSpreads, as reported by the Financial Times, who were allowed to make large long bets on WorldSpreads’ shares without being required to post much if any collateral. (This supposed scheme to support WorldSpreads’ share price is being separately investigated.). The clients lost money, on paper, as WorldSpreads’ share price fell and eventually became worthless, but were never required to deposit funds to cover their losses. KPMG estimates amounts owed at about £2.5 million.
  • Action is still being considered against WorldSpreads’ former auditors, Ernst & Young.
  • A fight is brewing between WorldSpreads’ ex-clients and the Royal Bank of Scotland, which is a secured creditor owed £1.5 million. As reported by FT, several clients argued that all the remaining cash should be treated as clients’ funds, which would give them priority over RBS’s secured creditor claim.

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