Sydney Financial Firm Under Investigation Over $138m Investment Scam

A Sydney-based financial services company is under investigation over allegations that its failures enabled a sophisticated investment scam, potentially costing investors up to $138 million.

The Australian Securities and Investments Commission (ASIC) is probing MGF Capital, which holds an Australian Financial Services Licence (AFSL), over fears of "oversight, due diligence and compliance failures" related to its corporate authorised representatives.

Investigation into MGF Capital

ASIC is concerned many investors may have been exposed to significant financial losses. The corporate regulator told investors that it was "actively investigating" MGF Capital, which supplied a financial licence to Main Group FX, an alleged investment scam.

Candice Driver, a Sydney marketing executive, is among 13 investors who have collectively lost more than $2 million to Main Group FX. She poured tens of thousands into the company in 2023, believing she was investing in commodities on a trading platform.

"Which, as Australians, we're told to trust," Ms Driver said.

Ms Driver reported Main Group's licence provider, MGF Capital, to the Australian Financial Complaints Authority (AFCA). Within days of the complaint, MGF Capital's director, Matthew Starkey, contacted her urging her to withdraw her complaint.

"If you could make contact with them [AFCA] and explain you are in the process of resolving the matter that would be great," Mr Starkey said in an email.

Concerns over due diligence

Ms Driver questions what due diligence MGF Capital did on Main Group, with serious questions about the veracity of at least one of its company directors. An international student called Junru Sun was Main Group's first director in February 2023, at the time it became an authorised representative of MGF Capital.

"She was a 21-year-old who was the director on ASIC paperwork for one month only," Ms Driver said.

MGF Capital said it "did not learn of the change in directorship" until afterwards.

AFCA membership and regulation

Despite the devastation facing investors, MGF Capital has been able to escape future AFCA compensation claims by essentially checking itself out of oversight. By January 2024, MGF Capital had cancelled its AFCA membership — stripping the financial authority of the power to order compensation in any future claims.

Ms Driver said this seemed to be a "huge and unbelievable loophole".

"I was completely gobsmacked," she said.

AFCA said its membership "is dependent on the financial services a firm is licensed to provide".

"Where a firm is not legally required to be an AFCA member, AFCA cannot compel the firm to become a member," it said.