Former Rabbitohs and EPL sponsor cops largest ever fine from ASIC case

An online trading house that ripped off thousands of customers has been hit with $300 million in fines by the Federal Court – a record for any case brought by the Australian Securities and Investments Commission (ASIC).

Union Standard International Group, the one-time sponsor of former English Premier League team Sheffield United FC, received the massive fine as a result of its alleged systemic failures on Thursday, after a long-running court case first brought in 2020.

As previously reported by this masthead, Union Standard – also known as USGFX – duped investors in Australia and China into pouring as much as $300 million into highly complex financial derivatives over several years.

When the scheme collapsed in 2018, tens of millions of customers’ money was removed from USG’s bank accounts and transferred to a company in Vanuatu before disappearing entirely.

USGFX acted like a management company while the official trading platforms that customers used were called TradeFred and EuropeFX.

EuropeFX was the official foreign exchange trading partner of the South Sydney Rabbitohs until 2019.

USGFX’s affiliates sold financial products, known in the industry as “contracts for difference”. These products allow customers to gamble on the price movement of different investments over specific time frames, for example betting how much the price of gold would increase or decrease in a 24-hour period. The products have previously been referred to by the Federal Court as “financial heroin hits”.

ASIC alleged that instead of running a fair platform, USGFX and its associates designed the scheme to ensure that between 95 and 99 per cent of customers not only lost their money but owed the broker thousands of dollars.

Justice Michael Wigney described the case as one of the worst the court had ever seen.

“I find it difficult in this case to envisage a more serious case of contravening conduct. In my view, all the relevant circumstances of this case point to it being a case which warrants the strongest deterrence within the maximum penalty,” he said.

Wigney noted that: “EuropeFX’s contraventions were unquestionably egregious, deliberate and flagrant. By its conduct, EuropeFX systematically exploited many vulnerable and financially naive and gullible customers for its own financial gain.”

USGFX operated out of an office in Martin Place in Sydney’s financial district for several years and was seen as a highly successful group bringing in considerable amounts of client money from customers across Australia and Asia.

But it wasn’t all smooth sailing. In 2017, USGFX’s customers in China took staff at the group’s Shanghai office hostage, demanding repayment until the police intervened.

Following the incident, China requested assistance from Australia to stop the scheme, which had affected more than 10,000 people.

Investigations by this masthead in 2019 and 2020 found that a group of Australian ‘fixers’ – all highly qualified financial services professionals – helped USG, TradeFred and EuropeFX set up its call centres, websites and payment platforms to funnel investors into the high-risk scheme.

The fixers also helped USG obtain a financial services licence that allowed it to sell the high-risk contracts for difference.

While on the surface USG, TradeFred and EuropeFX were Australian, the ownership was linked back to Taiwan and on to the United States through various companies controlled by people who were suspected to have not existed or were directors-for-hire.

This included a man who gave his home address as a flat above a shop in a war-torn part of Myanmar and who never responded to any inquiries from the court or the regulator.

The court also heard that the scheme was likely run by a mysterious leader, sometimes known as Queena Lee, although authorities have never been able to find her.

Along with the record fine, the case is one of the first times ASIC has brought a case against an Australian company for breaking the laws of another country. A key plank in the case is that USG continued to sell its products to people based in China, where they are entirely illegal.

ASIC chairman Sarah Court said the penalties were the highest ever secured in connection with an ASIC matter and said the outcome would send a strong message of deterrence.

“Union Standard, EuropeFX and TradeFred operated business models that deliberately targeted inexperienced and vulnerable people using aggressive sales tactics to pressure them to trade in highly risky [contracts for difference] products.”

The orders are stayed until July to allow the defendants an opportunity to appeal the record fine.

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