Keenan, in the matter of Prospero Markets Pty Ltd (In liq) [2025] FCA 390 (24 April 2025)

1. Prior to the liquidation, Prospero was the holder of an Australian Financial Services (AFS) Licence and operated a foreign exchange over the counter (OTC) derivatives business, offering financial products including margin foreign exchange contracts and contracts for difference. Prospero's AFS Licence authorised it to:

(a) make a market for derivatives and foreign exchange contracts;

(b) issue and deal in derivatives and foreign exchange contracts on behalf of clients; and

(c) provide general financial product advice in relation to derivatives and foreign exchange contracts.

1. As part of its operations, Prospero held monies deposited by its clients (Client Money). Currently, the amount of Client Money held by Prospero exceeds $19 million.
2. In November 2023, the Australian Securities and Investments Commission (ASIC) commenced an investigation into Prospero, citing concerns regarding the management of the company's business, including compliance with its AFS Licence conditions and obligations as an OTC derivatives issuer under the Corporations Act.
3. ASIC's investigation commenced in the wake of the Australian Federal Police's "Operation Avarus-Nightwolf" which resulted in former officers and responsible managers of Prospero being charged with money-laundering offences in October 2023.
4. Following an application by ASIC, on 10 April 2024, the Court ordered that Prospero be wound up on the just and equitable ground and that the Liquidators (Mr Jonathon Sherwood Keenan, Mr Peter Paul Krejci and Mr Andrew John Cummins) be appointed. Prior to the appointment of the Liquidators, the company had ceased trading and all clients' positions had been closed. For clients of Prospero, these events had the unfortunate practical consequence that their money was caught up in the liquidation of Prospero and unable immediately to be extracted. The orders made on this application will permit that problem to be alleviated.
5. As detailed below, the evidence suggests that monies received from different categories of clients have been intermingled in various accounts (including intermingling between United States dollar (USD) and Australian dollar (AUD) accounts), and precise tracing is either impossible or impractical. However, there does not appear to have been intermingling between client funds and general company funds.
6. Further, and helpfully for present purposes, Prospero maintained a trading platform referred to as MetaTrader4 (MT4) which is connected to a database which records:

(a) client identifying information such as names, addresses, email addresses, and trading history (but not client bank account details); and

(b) client trading information such as deposits, active trades, and "balance" and "equity" amounts,

such that the Liquidators are able to identify the clients of Prospero and identify the amounts that are apparently returnable to each client. I say "apparently", because the distribution process will include a step that enables clients to dispute the distribution amount based on the MT4 records nominated by the Liquidators, such that it remains at least a possibility that the actual distribution to a particular client will vary from the "balance" or "equity" figures recorded for that client on the relevant MT4 database.

1. The Liquidators do not hold the bank account details of every client and the distribution process will therefore need to include a step for the clients to identify appropriate bank accounts for receiving payment.
2. Relevant to this proceeding, there are two MT4 platforms, which have been described in the evidence as the MT4 AU Clients Platform and the MT4 Offshore Platform. As discussed in more detail below, the evidence indicates that only the MT4 AU Clients Platform and associated database (MT4 AU Clients Database) records Client Money. The MT4 Offshore Platform was used for certain clients residing overseas and it and its associated database (MT4 Offshore Database) do not record the funds of any Prospero clients.
3. The Liquidators have sought to test the accuracy of the data in the database associated with the MT4 AU Clients Platform, including by comparing that data with information provided by clients of Prospero. That process suggests that the data is accurate, and the limited discrepancies can be explained.
4. Of some relevance to this application, the Liquidators have prepared a statement of estimated outcomes (Estimated Outcome Statement) which indicates that, if the available funds are dealt with in accordance with the regime endorsed by the orders of the Court, the funds available for distribution to clients will likely exceed the entitlements of those clients: i.e. there is unlikely to be a shortfall of client funds.
5. The Estimated Outcome Statement also identifies the possible outcomes for creditors. Prospero has a material level of assets. The Liquidators have calculated two scenarios. One is more optimistic, in the sense that there are lower liquidation costs and lower amounts payable to priority and unsecured creditors. One is more pessimistic, in that there are higher liquidation costs and higher amounts due to creditors. On the optimistic scenario, after paying out client entitlements, liquidation costs (including remuneration) of approximately $3.2 million, priority creditors of approximately $1.2 million and unsecured creditors of approximately $1.6 million, there is a surplus available of $611,267 - i.e. unsecured creditors are fully paid and there is money left over. On the pessimistic scenario, after paying out client entitlements, liquidation costs of approximately $3.65 million, and priority creditors of approximately $1.4 million, there are unsecured creditor claims and related costs of approximately $3.3 million and a shortfall of $2,166,165 (i.e. unsecured creditors would receive approximately 35 cents in the dollar). Of course, the actual outcome could be some number in between, or a different outcome entirely. Nevertheless, these projections are useful in identifying the likely range of outcomes and therefore the likely practical consequences of the issues which the Liquidators have to confront, including the appropriate treatment of the Liquidators' costs and remuneration.
6. The Liquidators seek the Court's judicial advice or directions, including on two primary issues:

(a) First, issues concerning the appropriate source of remuneration and expenses of the Liquidators - in particular, whether the Client Money or the company's general funds are the proper source of payment of the Liquidators' remuneration and costs.

(b) Second, issues regarding the distribution of the Client Money to the clients of Prospero, including, inter alia, the appropriateness of pooling the company's various AUD and USD bank accounts in which Client Money is held, and the treatment of potential entitlements of certain categories of clients.

1. By an order made by the Court on 17 October 2024, the Contradictor was appointed to assist the Court, having regard to the interests of the creditors of Prospero and ensuring fairness between them with respect to the issues identified above. The Contradictor was represented by counsel (Ms E Beechey and Mr N Carey) who provided considerable assistance to the Court.
2. The Court also had the benefit of correspondence from SMB Law, who say they act for 229 onshore clients. SMB Law sent a letter to the Liquidators on 20 March 2025 which provided their clients' position as to relevant issues which were raised for the Court's advice and direction in this proceeding (the SMB Law Letter). The letter stated that their clients did not wish to increase costs by intervening in the proceedings. The Liquidators quite properly included this letter in their evidence before the Court and brought these issues to my attention in their submissions to the Court.
3. No clients or creditors appeared at the hearing.
4. Pursuant to r 2.8 of the Federal Court (Corporations) Rules 2000 (Cth), a person who makes an application for an order under s 90-15 of the IPS-Corps must serve on ASIC, a reasonable time before the hearing of the application, a copy of the originating process, or interlocutory process, and supporting affidavit in respect of the application. On 5 August 2024, the Liquidators sent ASIC a letter that stated that the Liquidators had commenced proceedings to seek remuneration approval and judicial advice in relation the Client Money, and enclosed a sealed copy of the originating process, the supporting affidavit of Jonathan Sherwood Keenan and a redacted copy of Exhibit JSK-1.

1. Section 90-15 of the IPS-Corps, which is at Schedule 2 of the Corporations Act, and given effect by s 600K of the Corporations Act, provides as follows:

90‑15 Court may make orders in relation to external administration

Court may make orders

(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.

Orders on own initiative or on application

(2) The Court may exercise the power under subsection (1):

(a) on its own initiative, during proceedings before the Court; or

(b) on application under section 90‑20.

(3) Without limiting subsection (1), those orders may include any one or more of the following:

(a) an order determining any question arising in the external administration of the company;

(b) an order that a person cease to be the external administrator of the company;

(c) an order that another registered liquidator be appointed as the external administrator of the company;

(d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company;

(e) an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator;

(f) an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.

(4) Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

(a) whether the liquidator has faithfully performed, or is faithfully performing, the liquidator's duties; and

(b) whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and

(c) whether an action or failure to act by the liquidator is in compliance with an order of the Court; and

(d) whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and

(e) the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.

1. The power conferred on the Court to make "such orders as it thinks fit" under s 90-15(1) is undoubtedly a very broad power. It has been described as such: e.g. Kelly (as joint and several liquidators of Halifax Investment Services Pty Ltd (in liq)) v Loo (No 8) (2020) 144 ACSR 292; [2020] FCA 533 at [51] per Gleeson J.
2. The power under s 90-15 is certainly broad enough to permit the Court to make an order in a traditional form of the sort that could be made under former ss 479(3) and 511 of the Corporations Act: Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 (Walley) at [41] per Gleeson J; Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481 at [8] per Gleeson JA; Reidy, in the matter of eChoice Limited (Administrators Appointed) [2017] FCA 1582 at [27] per Yates J; Re Woodhouse (in their capacities as joint and several liquidators of Forex Capital Trading Pty Ltd (in liq)) (2022) 159 ACSR 669; [2022] FCA 600 at [51] per Banks-Smith J.
3. It is unnecessary in the present case for me to make any observations as to the full width of the power under s 90-15, and given that the matter was not the subject of submissions, I will refrain from doing so. I also do not need to consider the extent to which the exercise of the power under s 90-15 should be circumscribed by considerations and principles applicable to former s 479 of the Corporations Act, including those discussed by Goldberg J in Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409 (Ansett) (see Walley at [41] per Gleeson J), because the Liquidators' application is consistent with those considerations and principles in any event. In Ansett at [65], Goldberg J observed:

There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator's or administrator's unease. There must be an issue calling for the exercise of legal judgment.

1. Section 63 of the Trustee Act enables a trustee to apply to the Court for an opinion, advice or direction on any question respecting the management or administration of the trust property or the interpretation of the trust instrument. Section 63 provides as follows:

(1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.

(2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction.

1. The principles applicable to the Court's power to provide judicial advice under s 63 were considered in detail by the plurality in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 (Macedonian Orthodox Church) per Gummow ACJ, Kirby, Hayne and Heydon JJ. There, the plurality observed (at [56]-[60]) that the express words of s 63 provide no limitation on the power of the Court to provide judicial guidance or any limitation on the weight to be given to certain discretionary factors. The sole jurisdictional bar to relief under the section is that "the applicant must be able to point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument": Macedonian Orthodox Church at [58].
2. In Re Rosewood Research Pty Limited [2014] NSWSC 449 at [30], Darke J observed that once that jurisdictional requirement is satisfied, the Court has discretion to provide advice of the kind contemplated by the section and that discretion is confined only by the subject matter, scope and purpose of the legislation.
3. In the present case, the distribution approach proposed by the Liquidators involves choices that have different financial consequences for different groups of people. For example, people listed in the MT4 Offshore Database will likely get nothing, and some of those people have claimed an entitlement to participate in the distribution in respect of significant sums. People with accounts of less than AUD$100 will get nothing. People with accounts in USD will do better or worse depending upon the notional date on which the relevant currency conversion occurs. The decision as to whether to deduct the Liquidators' costs and remuneration from general assets or from trust assets will preference clients over unsecured creditors, or vice versa. For these and other reasons, the Liquidators may be exposed to claims from disappointed people as a result of the Liquidators' actions in seeking to distribute the funds in a sensible and rational way. In the circumstances, I am amply satisfied that this is an appropriate case for the Court to provide advice and issue directions and I do so, primarily, pursuant to s 90-15(1) of the IPS-Corps.

1. As observed earlier, Prospero was the holder of an AFS Licence. It provided financial products to its clients and held Client Money to carry out services for its clients, including for the investment and eventual return of funds on behalf of its clients. Its activities attract the operation of s 981A of the Corporations Act, which relevantly provides:

(1) This Subdivision applies (subject to subsections (2), (3) and (4)) to money paid to a financial services licensee (the licensee) in the following circumstances:

(a) the money is paid in connection with:

(i) a financial service that has been provided, or that will or may be provided, to a person (the client); or

(ii) a financial product held by a person (the client); and

(i) by the client; or

(ii) by a person acting on behalf of the client; or

(iii) to the licensee in the licensee's capacity as a person acting on behalf of the client.

...

1. Section 981H relevantly provides as follows:

981H Money to which Subdivision applies taken to be held in trust

(1) Subject to subsection (3), money to which this Subdivision applies that is paid to the licensee:

(a) by the client; or

(b) by a person acting on behalf of the client; or

(c) in the licensee's capacity as a person acting on behalf of the client;

is taken to be held on trust by the licensee for the benefit of the client.

1. By virtue of these provisions, the Client Money held by Prospero is taken to be held in trust for the benefit of the clients.

Source of payments of costs / Liquidators' remuneration

1. I deal with this issue early, before dealing with issues relating to the distribution of Client Money, because it has a significant bearing on whether there is likely to be any shortfall of Client Money.
2. The Liquidators seek orders that they are justified in paying their remuneration, costs and expenses from either:

(a) the Client Money held in Prospero's four bank accounts with the Commonwealth Bank of Australia (the CBA Client Accounts); or

(b) the general liquidation account, being the general funds of the company.

The Liquidators also seek approval of their reasonable remuneration, expenses and costs incurred to date and expected going forward.

1. The Contradictor submits that these amounts should be payable from the general assets of Prospero, not from the Client Money.
2. The present case is one where Prospero holds both trust monies (being the Client Money) and general assets of the company. The Liquidators have incurred expenses in relation to the investigation and consideration of claims as to the entitlements of clients to the Client Money, including the costs of the present proceedings. Should those expenses and remuneration be payable out of the trust property or out of the general assets? As revealed by the Estimated Outcome Statement, there are sufficient general assets of the company to permit payment of the Liquidators' costs and remuneration (as well as the Contradictor's costs), without any recourse to trust funds. If the costs and remuneration are payable out of the trust property then there is likely to be a shortfall in the Client Money available to pay the clients' entitlements.
3. The relevant activities of the Liquidators in the present case, and the need to return the Client Money to clients, arises from the liquidation of Prospero, in the sense that in the absence of the liquidation (which was not because of any insolvency but because of compliance issues), Prospero would continue to hold financial products attributable to its clients, such as margin foreign exchange contracts and contracts for difference. There would have been no need to close out all client positions, no need to return all funds to clients, and no need to conduct investigations, consider proofs of debt, or conduct the present application to this Court. The costs and remuneration of the Liquidators in connection with the Client Money is therefore, in that sense, attributable to the winding up of the affairs of Prospero.
4. A somewhat analogous situation arose in Re G B Nathan and Co Pty Ltd (in liq) (1991) 24 NSWLR 674 (G B Nathan), a decision of McLelland J. The company in question was a licensed money market dealer which invested funds on behalf of clients, including in making loans to third parties and purchasing bills of exchange, on which interest was payable. After reviewing the authorities, McLelland J observed as follows (at 689C-E):

Where work done by a liquidator in relation to trust assets may properly be considered as having been done for the purpose of "winding up the affairs of the company", it is I think consistent with general principle that any remuneration and expenses attributable to that work be paid out of the (non-trust) property of the company in accordance with s 556 of the Corporations Law, to the extent that there is such property available. To the extent that there is not sufficient available property, bearing in mind that generally speaking "a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property" (s 545), it would normally be appropriate to apply the principle referred to by Deputy Judge Nugee QC in the passage quoted earlier from Re Berkeley Applegate (Investment Consultants) Ltd (In Liq) and make an allowance to the liquidator out of trust assets. In the present case there is nothing to suggest that there is any relevant insufficiency of available property of the company to meet the liquidator's remuneration and expenses. The evidence suggests that there are realisable assets available to the liquidator of the order of $100,000. Accordingly there is no occasion for any allowance for the liquidator's remuneration and expenses to be made from trust assets.

1. Counsel for the Contradictor suggested that G B Nathan was a precedent for the proper approach in the circumstances of the present case, and no counsel was able to identify any authority that criticised the approach in G B Nathan or suggested that it was in error. No counsel identified any case in which, there being sufficient general assets to meet a liquidator's remuneration and expenses, a liquidator has nonetheless been permitted to draw on trust funds to meet them. Rather, in each case identified in which a liquidator has drawn on trust funds, there were no general assets or insufficient general assets to meet remuneration and expenses: for example, In re Berkeley Applegate (Investment Consultants) Ltd (In Liquidation) [1989] Ch 32 at 53D; Sutherland Re; French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361 at [212]; In the matter of AAA Financial Intelligence Ltd (in liquidation) [2014] NSWSC 1004 at [14]; In the matter of Houben Marine Pty Ltd (in liq) [2018] NSWSC 745 at [17]; Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 6) [2019] FCA 2111 at [29]- [30]; Lawrence, in the matter of Ozifin Tech Pty Ltd (in liq) v AGM Markets Pty Ltd (in liq) [2022] FCA 1478 at [203], [225]. That is not the case here. I propose to follow G B Nathan.
2. The appropriateness and reasonableness of that approach is fortified here where:

(a) there are substantial non-trust assets;

(b) as Ms Beechey points out, those assets are likely to have been created or enhanced by the fees that Prospero clients were required to pay under their agreements with Prospero;

(c) for the reasons set out below, the general assets will include all accrued interest on the trust assets, and the trust assets are greater than the general assets, with the consequence that as a result of the delay caused by the liquidation the trust assets have been declining in real terms (at the expense of the clients) and the general assets have been increasing in real terms (for the benefit of the creditors); and

(d) the Client Money is greater than the likely client entitlement, and so the general assets will be supplemented by some of the Client Money.

1. In circumstances where the Liquidators' costs and remuneration associated with the present issues will form part of the overall costs and remuneration of the liquidation payable out of the general assets, there is no need for the Court to approve any sums for costs or remuneration. The only orders the Court needs to make is an order concerning the costs of the Contradictor and an order to enable the Liquidator to recover all of its costs (including remuneration) of these proceedings, such costs to be costs in the winding up. I therefore make orders that:

(a) the Liquidators pay the reasonable remuneration and costs of the Contradictor on an indemnity basis, such costs to be costs in the winding up; and

(b) the Liquidators' reasonable costs and remuneration in relation to the proceedings be paid on an indemnity basis, such costs to be costs in the winding up.

1. The Liquidators seek directions regarding the distribution of the Client Money, including whether the Liquidators should pool money held in different client accounts, and how they should treat the conversion between USD and AUD.
2. The Liquidators have provided evidence that the Client Money was held in the four CBA Client Accounts, differentiated by the client status (being retail or wholesale) and currency of deposits (being AUD denominated or USD denominated): that is, AUD/wholesale, USD/wholesale, AUD/retail, and USD/retail. The Liquidators seek orders that they are justified in pooling the CBA Client Accounts for the purpose of distributing the Client Money from a single, interest-bearing bank account.
3. If there was an overall deficiency in Client Money, the question of pooling might have greater significance. The general approach to deficient funds was summarised by Markovic J in Australian Securities and Investments Commission v Caddick (No 2) [2023] FCA 1196 at [57] as follows:

In cases concerning distributions of mixed deficient funds, the general rule is that assets should be distributed in accordance with legal entitlements. However, in exceptional circumstances, where it is not reasonably and economically practical to ascertain strict legal entitlements, the Court may take a pragmatic approach even where to do so would amount to "a wise and commercial breach of trust": see Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 213.

1. As was observed by Brereton J (as his Honour then was) in Re BBY (recs and mgrs appted) (in liq) (No 2) (2018) 363 ALR 492; [2018] NSWSC 346 (Re BBY) at [57]:

...while there are references to the "impossibility" of tracing, the notion is not one of absolute impossibility, but whether tracing is not reasonably and economically practical, so that they should be regarded as irretrievably commingled... On the other hand, pooling may be inappropriate where the trust ledger records provide a reliable factual foundation on which to mould relief, and mere difficulty in ascertaining entitlements to permit distribution by single account may not suffice to justify "pooling", though that would be influenced by the size of the estate, the number of claimants, and the degree of difficulty.

(Citations omitted.)

1. An example of a case in which pooling was permitted was Re Krejci (as joint and several liquidators of Union Standard International Group Pty Ltd (in liq)) (2021) 159 ACSR 590; [2021] FCA 1483, where Jagot J held (at [46], quoting Georges (in his capacity as joint and several liquidator of Sonray Capital Markets Pty Ltd (in liq)) v Seaborn International (as trustee for the Seaborn Family Trust) (2012) 288 ALR 240; [2012] FCA 75 (Sonray) at [84]) that an exceptional circumstance had arisen to warrant deviation, as in that case it was not "possible to work out precisely who is entitled to what moneys in particular segregated accounts".
2. In the present case, there is unlikely to be an overall deficiency in client funds. However, there are insufficient funds held in the USD denominated accounts to meet USD balances identified in the MT4 AU Clients Platform, and a surplus of funds held in the AUD denominated accounts. That suggests that there may have been an intermingling of funds. It would not support the desirability of keeping the funds separate, and of assuming that only USD denominated funds contain the money of clients with USD balances. The clients with USD balances would be materially worse off if there was no pooling, because there is a significant shortfall in USD denominated accounts. Given that there is a surplus in the AUD denominated accounts, paying clients with USD denominated entitlements, in part, from AUD denominated accounts is unlikely to be at the expense of clients with AUD denominated entitlements, and therefore it is unlikely that pooling will materially disadvantage any clients when compared to whatever is the true position.
3. The evidence indicates that if the Liquidators were to attempt to trace, that would be time-consuming and expensive. Further, the evidence indicates that the Liquidators are unable to trace fully because Prospero received various bulk deposits from money processors such as Checkout, BPAY and Novatti, and the Liquidators do not have access to any statements that break down those bulk deposits and attribute particular amounts to particular clients. In addition, clients have not provided sufficient remittance information to trace all of their deposits.
4. If the CBA Client Accounts are pooled, the distributions will be in AUD and the balances of clients with USD balances will need to be the subject of currency conversion prior to distribution. Because the amounts will need to be converted as at a particular date, clients with USD denominated balances might be better or worse off depending on the date selected.
5. In all of the circumstances, I am comfortably satisfied that the present case is an appropriate case for pooling, that it is appropriate for the Liquidators to pool the funds in the CBA Client Accounts into a single AUD account, and that there be an order that the Liquidators are justified in treating the money held in the CBA Client Accounts as the full extent of the funds held by Prospero for its clients pursuant to s 981A of the Corporations Act. The orders will endorse a distribution mechanism whereby Client Money is pooled, including converting the client balances in USD into AUD. I note the similar approach taken by Black J in Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 (MF Global) at [97].

1. A conversion rate for converting the USD denominated client balances to AUD would sensibly be selected by reference to a particular date. The Liquidators have submitted, and the Contradictor accepts, that the best position would be by analogy to the position under s 554C of the Corporations Act: i.e. that the conversion occur at the exchange rate applicable on the date of the winding up order. I agree this is a sensible approach. The orders therefore endorse an approach that the relevant conversion rate should be assessed by reference to the exchange rate as at 10 April 2024, being the date of the Liquidators' appointment.
2. I note that in the SMB Law Letter, it is suggested that conversion should be at the date that the funds are actually converted, if that date produces a higher return for clients with USD balances. I do not accept this is reasonable. A "best of rates" approach is skewed in favour of clients with USD balances. It is always possible that there ends up being a shortfall of Client Money, such that such an approach would advantage one group of clients at the expense of another group. Further, it is not unlikely that there will be a shortfall overall, such that this approach would advantage one group of clients at the expense of creditors. The Liquidators are justified in adopting the approach they propose.

Persons who traded using the MT4 Offshore Database

1. The Liquidators seek a direction that they are justified in treating persons who traded via the MT4 Offshore Platform as having no entitlement to distribution from the Client Money (subject to the possibility that they could establish an entitlement through the process of a Dispute Notice). To understand why that direction is sought, it is necessary to explain Prospero' business, its related offshore entities, and the investigations conducted by the Liquidators to date in a little more detail.
2. In the operation of its business, Prospero used the MT4 trading platform, which was licensed by an entity called MetaQuotes Software Corp, to enable its clients to make trades.
3. As previously explained, the platform connected to a database containing client information, such as names, addresses, emails and MT4 platform trading history, and client trading information including the "balance" and "equity" amounts of each client (the difference between these two figures is explained further below at [96]).
4. For reasons that are not clear to the Liquidators, Prospero onboarded local Australian clients using an existing MT4 licence held in the name of Prospero Markets Company Limited, a company incorporated in New Zealand (Prospero NZ). This means that Prospero did not hold the licence to the platform Australian clients used to make trades.
5. However, curiously, Prospero did hold an MT4 licence in its name, but this licence was only used for trades made by clients of an offshore entity, Prospero Markets LLC, incorporated in Saint Vincent and the Grenadines (Prospero SVG). It is not clear to the Liquidators why Prospero did not use the MT4 licence it held in its own name but instead used the licence that was held in the name of Prospero NZ.
6. The Liquidators' investigations to date indicate that Prospero NZ did not have clients. Relevant to the distribution of the Client Money, this supports the inference that the Client Money would not have been mixed with funds deposited by clients of Prospero NZ.
7. It appears that the funds of some persons who traded through the MT4 Offshore Platform were held by an Australian company Chang Jiang Financial Pty Limited ACN 624 164 067 (Chang Jiang), which is also in liquidation.
8. The evidence suggests that:

(a) persons who traded using the licence held in the name of Prospero NZ (on the MT4 AU Clients Platform) were clients of Prospero and are entitled to distribution from the Client Money; and

(b) persons who traded using the licence held in the name of Prospero (on the MT4 Offshore Platform) were not clients of Prospero and were instead clients of Prospero SVG. These persons would not be entitled to distribution from the Client Money.

1. To date, 54 individuals who traded using the MT4 Offshore Platform have contacted the Liquidators claiming an entitlement to the Client Money. The total amount of entitlements claimed by these individuals is over $4.5 million. The MT4 Offshore Database records over 33,000 persons who traded on the offshore platform, although it appears this figure may include both 'test' and 'demonstration' accounts that are not referrable to any legitimate individuals.
2. It is possible that some of these 54 individuals thought they were depositing money with Prospero in circumstances where the licence was held in the name of Prospero and the name of Prospero may have appeared on various documents these 54 individuals saw in relation to the database, which would have contributed to their understanding of which entity they were depositing money with. However, the investigations the Liquidators have conducted and the evidence available indicates that it is unlikely that these persons were clients of Prospero.
3. The Liquidators have reviewed correspondence from the 54 individuals who contacted the Liquidators. Various of the individuals have identified bank account numbers (or bank accounts ending with identified numbers) into which they deposited money, but they do not appear to be amongst the bank accounts held by Prospero. Instead, there is evidence that some of these clients may have been depositing their money into accounts held by Chang Jiang. Further, the records of Prospero identifying clients do not identify any of the persons listed in the MT4 Offshore Platform.
4. Counsel for the Contradictor quite properly drew my attention to additional evidence to suggest that persons who traded via the MT4 Offshore Plaftorm did not have claims to the Client Money, and referred me to three emails in this regard.
5. On 26 April 2024, Mr Hong (Prospero's Head of Institutional Partnerships and responsible manager under the company's AFS Licence) sent an email to the Liquidators which explained as follows:

As the off-shore entity started operations before the ASIC licence ,but the first MT4 license was obtained first using the AU entity but used for offshore business initially, later on when the ASIC business started operating in 2021 , we initially used 1 server to handle client for both offshore and [onshore], few months into the business we bought over another company (NZ company）which had another MT4 lisence which we used purely for asic clients, months later we did a server migrate moving all au client position and information to the new server (NZ) . therefore now the NZ lisence hold all the ASIC information.

(Errors in original.)

References to "ASIC" are references to what was then the subject of ASIC's investigations, i.e. Prospero, such that the word "Prospero" can be read in place of "ASIC".

1. Subsequently, in an email sent to the Liquidators on 8 May 2024, Mr Hong stated: "To my knowledge there is no PMG clients on PMPL server vice versa". In an earlier email, "PMG" was defined as "Prospero Markets Global LLC" which is likely a reference to Prospero SVG, and "PMPL" was defined as Prospero.
2. Finally, in response to an email from the Liquidators sent on 14 May 2024 which asked, "is it possible to use [A]ustralian entity operational funds if any, to return to Chinese clients", Mr Hong responded as follows:

No, we cannot deal with any claims that are not clients of Prospero Markets Pty Ltd. You have advised that clients prefixed with "100" are offshore clients, with claims against Prospero Markets LLC, not Prospero Markets Pty Ltd.

1. When taken together, this evidence strongly suggests that clients with money on the MT4 Offshore Platform are not clients with money held by Prospero. That does not mean that the persons who traded via the MT4 Offshore Platform are not entitled to recover money from their trading accounts. They are just not entitled to recover this from the Client Money.
2. The next issue for me to consider is whether, notwithstanding the prima facie conclusion that individuals who traded via the MT4 Offshore Platform are not entitled to the Client Money, they should be notified of their lack of entitlement - that is, whether they should be afforded the opportunity to seek to prove their entitlement notwithstanding the existing evidence to the contrary. The Contradictor submitted that they should be afforded that opportunity. The Liquidators submitted that they should not, other than those who had already contacted the Liquidators prior to the date of the orders.
3. The evidence of Mr Keenan is that the process of notifying the 33,000 clients on the MT4 Offshore Database will be costly and time-consuming. Mr Keenan estimates that:

(a) the cost of upgrading the Link Market creditor portal and issuing an 'email blast' to the 33,000 persons will be at least $32,700 (plus GST); and

(b) the cost of reviewing Dispute Notices and issuing Rejection Notices to only 1% of the 33,000 persons, which in Mr Keenan's evidence is a conservative percentage, will cost approximately $303,600 (plus GST).

1. There would also be costs associated with translating notices and correspondence, as most of the names recorded in the MT4 Offshore Database are recorded in Chinese characters, and it is presently not possible to determine how many different language translations are required.
2. On that basis, the Liquidators do not propose to notify each of the 33,000 persons in the MT4 Offshore Database, but only propose to notify those individuals listed in the MT4 Offshore Database who contacted the Liquidators prior to the date of the orders I made on 2 April 2025 (i.e. primarily those who contacted the Liquidators in response to previous publicity surrounding Prospero, and the Liquidators' actions in inviting proofs of debt). I note that some of the individuals who contacted the Liquidators have made material claims.
3. Whilst there is a possibility that this course may deprive some persons with genuine claims to the Client Money from raising such claims before the distribution, I am satisfied that the risk of this is minimal and that the Liquidators' investigations strongly suggest that these individuals do not have claims against Client Money. The minimal possibility of a valid claim being brought must also be weighed against the significant cost of undertaking a wider notification, which will, on the evidence available to the Court, reduce by hundreds of thousands of dollars (and possibly even more) the money available for distribution. This would quite likely cause a shortfall in the funds available to pay clients on the MT4 AU Clients Database, and even more likely cause or aggravate a shortfall of money available to creditors, and thus may materially reduce the amount of money available to people who have valid claims against Prospero.
4. Taking all these matters into account, I am satisfied that the approach proposed by the Liquidators is appropriate. I will therefore make a direction that the Liquidators are justified in adopting a distribution process that does not notify all 33,000 persons on the MT4 Offshore Database of their 'nil' entitlement, but only notifies those individuals listed in the MT4 Offshore Database who contacted the Liquidators prior to the date of the orders I have made on 2 April 2025. I note that this process permits the people in the MT4 Offshore Database who have already contacted the Liquidators to raise a Dispute Notice, and if necessary, apply to the Court for orders in relation to that Dispute Notice.

Persons with "equity" or "balances" of AUD$100 or less

1. The Liquidators seek directions from the Court that in relation to accounts that have an "equity" or "balance" amount of AUD$100 or less, they are justified in automatically treating those accounts as having no right to participate in the distribution of the Client Money. This is in circumstances where the Liquidators' cost of administering the claims in relation to each of these accounts would exceed AUD$100 per account and would reduce the amount available to clients with entitlements above AUD$100.
2. The MT4 AU Clients Database records that 261 accounts have an "equity" or "balance" amount of AUD$100 or less, with the total amount of entitlements for these accounts calculated at $4,268.23. In contrast, the total amount of entitlements of accounts with a balance over AUD$100 is $19,163,520.72, comprising 1,115 accounts in total.
3. The Liquidators provided general evidence that the cost of administering the position of each client with a balance of AUD$100 or less will require, at least, 30 minutes of an intermediate accountant's time, at a rate of $300 per hour (plus GST) to review each client's proof of debt. They submit that this work will then need to be reviewed in batches by managers and/or principals which will increase the overall cost.
4. Accordingly, the Liquidators propose to treat clients with entitlements of AUD$100 or less as having no entitlement to Client Money.
5. The Liquidators submit that this approach has been accepted by the courts in similar situations, and refer to the decision of Brereton J in Re BBY at [393]-[397]. There, in making a direction that the Liquidators were justified in treating client accounts with a balance of $100 or less as having no entitlement to participate in the amounts recovered, Brereton J observed (at [396]) that:

Such a direction gives pragmatic effect to the reality that the costs to the administration (and thus creditors generally) associated with administering a claim for the amount specified are disproportionate to the benefit to the claimant.

1. A similar approach was taken in Sonray, where 1,328 clients were excluded from a distribution in circumstances where the total balance for those clients was $8,980.89. The average balance for those 1,328 clients in that case was $6.76, a similarly negligible amount to the average balance in the present case for each client with entitlements under AUD$100, which is $16.35.
2. I accept that the Liquidators' proposed approach is reasonable, and I will order that the Liquidators are justified in taking that approach.

1. The Liquidators' investigations indicate that Prospero offered promotional "bonuses" or "credits" to its clients, and some 51 clients listed on the MT4 AU Clients Database identified bonus amounts, described on the MT4 Client Database as "Total Credit Facility". The "balance" and "Total Credit Facility" figures are then added to produce the client's "equity" figure. The total amount of all "Total Credit Facility" amounts across all clients in the MT4 AU Clients Database is AUD$277,480.
2. The Liquidators were unable to locate a comprehensive set of documents identifying the terms of these promotions and the classes of clients they applied to. They have only been able to locate a set of promotional conditions, described as "Credit Bonus Promotion Rules Wholesale Client Only" updated as at 1 October 2023 (2023 Wholesale Promotion Rules), that refer to a set of trading conditions which, if satisfied, allow the relevant clients to convert trading "Credits" into "Credit Bonuses".
3. In circumstances where the Liquidators do not have complete records of the bonuses or promotions applicable to the company's clients, the Liquidators seek directions that it is reasonable to apply the terms from the 2023 Wholesale Promotion Rules to all clients who satisfy those terms. The Contradictor agrees with this course.
4. Notwithstanding the absence of complete records to suggest that the promotional conditions in the 2023 Wholesale Promotion Rules would have been the same conditions that applied to all clients, I am satisfied that this is a pragmatic solution to ensure, as far as possible, that clients entitled to bonus promotions are not deprived of their bonus amounts, but also that clients not entitled to bonus amounts are not overcompensated.

1. The Client Money accrues interest of approximately $60,000 per month. As at 6 February 2025, there was accrued interest of $658,424. The Liquidators submit that the accrued interest should be treated as a general asset of the company and not paid to clients. The Contradictor agrees.
2. As set out earlier, the Client Money is money to which Subdivision A of Division 2 of Part 7.8 of the Corporations Act applies. Section 981B requires that the money be paid into an account with certain features. Section 981C makes provision for, inter alia, interest, and relevantly provides as follows:

(1) The regulations may deal with all or any of the following in relation to accounts, or a class of accounts, maintained for the purposes of s 981B:

...

(c) how interest on an account is to be dealt with;

...

1. Regulation 7.8.02(7) of the Corporations Regulations 2001 (Cth) (Corporations Regulations) provides that, for s 981C(1)(c) of the Corporations Act, if money is held in an account maintained for s 981B of the Corporations Act, then:

(a) the financial services licensee is entitled to the interest on the account; and

(b) the interest on the account is not required to be paid into the account;

only if the financial services licensee discloses to the client that the financial services licensee is keeping the interest (if any) earned on the account.

1. The Liquidators were unable to locate a comprehensive set of agreements applicable to different types of clients (for example, wholesale or retail) and at different points in time. The Liquidators were able to recover a Whole Client Agreement as at 29 March 2021 and Terms and Conditions for retail clients as at 5 October 2021. Both agreements state that Prospero "are solely entitled to any interest or earnings derived from your moneys being deposited with us or invested by us in accordance with the Applicable Laws". While the Court cannot be certain that this term was included in the agreements of all relevant clients, it is likely that it was and that sufficient disclosure has been provided to clients. As was submitted by the Contradictor, a liquidator seeking judicial direction is not required to prove the facts to a certain standard of proof as would be the case in adversarial litigation: Macedonian Orthodox Church at [78]-[81].
2. I am satisfied that I should make a direction to the effect that the Liquidators are justified in treating any Client Money remaining after clients have been given their entitlements recorded in the MT4 AU Clients Database as assets of Prospero. That will include accrued interest, as well as any other undistributed funds. However, that also means that interest will only become an asset of Prospero after client entitlements are paid in full, consistently with the order of payment specified in reg 7.8.03(6) of the Corporations Regulations; see also MF Global at [168]-[179] per Black J. That means that in the event there would otherwise be a deficiency, the interest should first be used to meet the deficiency in Client Money.

1. The Liquidators have proposed a process of calculating each client's individual entitlement to the Client Money and distributing each client's entitlement where they are eligible (the Distribution Process). The Distribution Process was largely unopposed by the Contradictor, save in relation to the notice period which I discuss below.
2. The Distribution Process is premised on clients receiving distributions which are determined by reference to the "balance" recorded in their account on the MT4 AU Clients Database, or their "equity" where appropriate. The Liquidators have conducted a manual adjudication process to ensure the accuracy of the Company's records against the claims from creditors, which involved reviewing supporting documentation provided by clients. The evidence suggests that the records of entitlements in the MT4 AU Clients Database appear to be accurate. Only limited discrepancies have been identified between the proofs of entitlement lodged by the clients and the balances recorded for the relevant clients in the MT4 AU Clients Database, and the Liquidators have identified rational explanations for those discrepancies. For example, some clients had not deducted trading losses.
3. Some clients claim that the amount they are entitled to was reduced due to the forced closure of their positions by the Company. Any such claims are properly classified as potential damages claim, and the clients would be unsecured creditors in respect of those claims.
4. I am satisfied that a direction should be made that the Liquidator would be justified in using the "balance" recorded in the MT4 AU Clients Database for the purpose of calculating the entitlements of Prospero's clients to the Client Money, subject to the observations below about the "equity" field in the database.

1. The Distribution Process involves notifying each client of their entitlement to the Client Money by way of an Admitted Entitlement Notice. Each client should be emailed if an email address has been recorded in the MT4 AU Clients Database, or the MT4 Offshore Database for the class of MT4 Offshore Database clients who are being notified.
2. Regardless of whether a client is part of the MT4 AU Clients Database or MT4 Offshore Database, the notification will usually take place by email. However, in circumstances where there is no email address recorded or emailing would not be the most appropriate method of communication, the Liquidators are entitled to post correspondence to the client's last known address.
3. The Admitted Entitlement Notice should inform each client of:

(a) the unique login credentials that they can use to access the Client Portal;

(b) the proposed distribution amount from the Client Money (the Proposed Distribution Amount); and

(c) how to dispute the Proposed Distribution Amount and the review process relating to any dispute about the Proposed Distribution Amount.

1. For clients in the MT4 AU Clients Database, the Proposed Distribution Amount is recorded as either the "equity" or "balance" amount recorded in relation to each specific client in the MT4 AU Clients Database. The "equity" amount recorded on the database may be different from the "balance" amount for certain clients, as the "equity" amount includes bonus entitlements of the clients. The Liquidators propose to assess the entitlement of clients to bonuses, and where appropriate use the "equity" amount if the client is entitled to bonus amounts.
2. For clients with a Proposed Distribution Amount greater than nil that are part of the MT4 AU Clients Database, the Admitted Entitlement Notice will also request that they provide further bank details or update their current bank details. Clients of the MT4 AU Clients Database with a Proposed Distribution Amount that is less than AUD$100 and all clients of the MT4 Offshore Database will not be required to provide or update their bank account details.
3. In the Distribution Process, the Liquidators have 84 days from the date of the Admitted Entitlement Notice to distribute the entirety of the Client Money to each client that has an entitlement. The 84 day period is necessary to permit clients to dispute the Admitted Entitlement Notice if they wish to do so through the process that I describe below.
4. At the conclusion of the 84 day period:

(a) clients with entitlements above AUD$100 will receive their Proposed Distribution Amount pari passu amongst all the other clients in the MT4 AU Clients Database according to their "balance" amount (or "equity" amount, where appropriate) recorded in that database; and

(b) any Client Money remaining after this distribution will be treated as part of the general assets of Prospero.

1. These two steps accord with the approach specified under regulation 7.8.03(6) of the Corporations Regulations, which relevantly provides as follows:

7.8.03 How money to be dealt with if licensee ceases to be licensed etc

...

(6) Money in the account of the financial services licensee maintained for section 981B of the Act is to be paid as follows:

(a) the first payment is of money that has been paid into the account in error;

(b) if money has been received on behalf of insureds in accordance with a contract of insurance the second payment is payment to each insured person who is entitled to be paid money from the account, in the following orders:

(i) the amounts that the insured persons are entitled to receive from the moneys in the account in respect of claims that have been made;

(ii) the amounts that the insured persons are entitled to receive from the moneys in the account in respect of other matters;

(c) if:

(i) paragraph (b) has been complied with; or

(ii) paragraph (b) does not apply;

the next payment is payment to each person who is entitled to be paid money from the account;

(d) if the money in the account is not sufficient to be paid in accordance with paragraphs (a), (b) or (c), the money in the account must be paid in proportion to the amount of each person's entitlement;

(e) if there is money remaining in the account after payments made in accordance with paragraphs (a), (b) and (c), the remaining money is taken to be money payable to the financial services licensee.

1. Each notification will contain a process by which the recipient can dispute the Admitted Entitlement Notice.
2. The Liquidators originally proposed a dispute process which provided clients with 14 days to dispute the Admitted Entitlement Notice. The Contradictor considered this to be too short and suggested a 28 day period would be more suitable. The Liquidators did not oppose a longer period, and I consider it reasonable to provide a longer period (being 28 days) to dispute any entitlements.
3. If a client does dispute their Proposed Distribution Amount, the process provides a mechanism for them to do so via providing the Liquidators with notice of the dispute in writing with supporting evidence and reasons (Dispute Notice). The Liquidators will then either (1) issue a revised Admitted Entitlement Notice containing a revised Proposed Distribution Amount; or (2) issue a Rejection Notice informing the client that their Dispute Notice has been rejected.
4. In circumstances where the client disagrees with the Rejection Notice, the Liquidators proposed providing that client with 14 days to apply to the Court for a review of the Admitted Entitlement Notice. The Contradictor contended that 14 days was too short and 28 days should be provided instead. I also consider that a longer period is reasonable in these circumstances.

1. Under the Distribution Process, clients will be contacted either via email or, in some instances, by post. The Liquidators have given evidence that for some clients there are no bank account details available. They are therefore not able to immediately return all money to all clients. In these instances, the Liquidators will request further bank details from the clients when sending the Admitted Entitlement Notice to people with a non-zero entitlement. There is a possibility that in cases where the Liquidators have requested further information from the clients, the clients do not respond.
2. For example, the Liquidators have provided evidence of an "email blast" sent to clients of the MT4 AU Clients Database on 8 May 2024, the relevant part of which was as follows:

You are receiving this email as you may be a creditor of the Company. An Initial Report to Creditors was issued on 8 May 2024 regarding the Liquidation. This report can be accessed on the creditor portal (link below). This report was issued to all known creditors of the Company, including clients, former employees, trades and unsecured creditors.

The Liquidators are using a Creditor Portal hosted via LINK Market Services for the purposes of capturing claims, uploading documentation (including banking instructions), conducting the formal adjudication process and ultimately, distributing funds to creditors.

The Creditor Portal provides greater security for creditors and the Liquidators, by requiring an identification verification process to be completed in order to submit a claim and upload documentation (including banking instructions). This creates a safer environment for information to be shared.

Accordingly, we require all parties with claims against the Company to login to the Creditor Portal to lodge a Formal Proof of Debt form, with relevant supporting documentation. This includes any parties that have already contacted the Liquidators' office, and/or lodged claim documentation.

1. Some clients did not engage with the email blast, some clients did not identify themselves and other clients do not have Australian bank account details. The Distribution Process therefore presents another opportunity for clients that did not engage with the original email to be contacted and to provide missing details.
2. There may be several reasons why some clients did not respond to the original email. There is a risk that clients have not responded because the contact details on the system are not current or are incorrect. Clients could possibly perceive the emails as spam. These are some of the reasons why it is appropriate that post be used as an alternative where the Liquidators deem it appropriate. In some cases, the clients may be genuinely uninterested in engaging further.
3. There is time and cost expended in pursuing clients that have not provided bank details. The Admitted Entitlement Notice procedure provides each client with 28 days to provide further bank account details. If the clients do not provide any bank account details, the Proposed Distribution Amount which pertains to such clients will be considered unclaimed Client Money.
4. The Liquidators and the Contradictor have proposed in such circumstances that unclaimed Client Money of this type should be distributed to ASIC pursuant to s 544 of the Corporations Act. I agree that is an appropriate approach and make an order accordingly that the Liquidators are justified in taking that approach.

1. In the event that there is a shortfall of Client Money, such that clients of Prospero are not able to receive their full entitlements, the Liquidators propose that, to obviate the need for a further proof of debt, the Liquidators be entitled to act as if each such client submitted a proof of debt for the difference as an unsecured creditor in the liquidation of Prospero.

Orders in light of the Trustee Act

1. Section 63(8) of the Trustee Act provides that where the question is who are the beneficiaries or what are their rights as between themselves, the trustee before conveying or distributing any property in accordance with the opinion, advice or direction shall, unless the Court otherwise directs, give notice to any person whose rights as beneficiary may be prejudiced by the conveyance or distribution.
2. The orders that I make do not strictly resolve any potential claim by any beneficiary to trust assets. However, they could have a practical effect of prejudicing the position of a beneficiary who would otherwise be entitled to a repayment. For example, they provide that the Liquidators are justified in treating persons who have an entitlement of AUD$100 or less as having no right to participate in the distribution of the Client Money. In those circumstances, I will make an order dispensing with the requirement to provide notice for the purpose of s 63(8) of the Trustee Act.
3. Section 63(10) of the Trustee Act provides that any person who claims that the person's rights as beneficiary will be prejudiced by the conveyance or distribution may within such time as may be prescribed by rules of court, or as may be fixed by the Court, apply to the Court for such order or directions as the circumstances may require, and during such time and while the application is pending, the trustee shall abstain from making the conveyance or distribution. Given that the Distribution Process contains notice periods, I will make an order that any application under s 63(10) of the Trustee Act is to be made in accordance with the process set out in, and within the time prescribed by, the relevant orders relating to the provision of a Dispute Notice.

I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moore.