Findings on UT Markets

Date: 11 October, 2016
Legal Notice 
The information contained in this communication is not legal advice and is not intended as such. It is private and confidential, intended for the use solely of its specific addressee. The document and information may be legally privileged. This letter should not be relied on by any person in connection with any legal or similar action.

Entities and Persons Involved

Based on our own research and the information provided by clients, we have identified a number of entities connected to UT Markets. UT Markets’ website has, since its creation, contained different statements as to the companies behind it. The entities we have identified so far are registered in different jurisdictions including Bulgaria, England and Wales, the Seychelles, St Vincent and the Grenadines and others.

In Bulgaria, we have identified a connected entity, a private limited corporation. After the commencement of the FSC inquiry described below, the directorship and ownership of the Bulgarian company we have identified has been changed to previously unconnected individuals. The company’s address has also been moved to an address in a village in provincial Bulgaria. If UT Markets is a fraud, this only emphasises the fact that its organisers are trying to cover their tracks and minimise liability. The action is typically taken when the real owners of a business are unable or unwilling to continue running it, but do not wish to go through the formal process of liquidating it.

UT Markets used Bulgarian phone numbers (both fixed and mobile lines) and advertised Bulgarian addresses for its operations (with at least 3 separate addresses in Bulgaria appearing over time). UT Markets has since written to clients to suggest that these addresses (or at least the most recent one) were not the addresses of its own offices, but rather of call centre contractors it used, in relationships which they claim have since been supposedly terminated.

UT Markets has not disclosed so far which these contractors might have been. The Bulgarian company which we have identified as the UT Markets entity, has made a formal declaration that its main activity was the operation of call centres. The address given for UT Markets in Bulgaria most recently was almost identical to the address of a large international call centre operator. It is possible that by selecting this address, UT Markets wanted to create an association with the international company operating the call centre.

We are in touch with the internal fraud department at the call centre company who have agreed to assist us.

UT Markets’ Bulgarian entity appears to not have registered any employees for social security contributions. This would have been required and not registering employees may be a strong indication that there were no call centre operatives employed by the entity in question.

The above relates to entities which appear so far to have been more directly involved with UT Markets. In addition, key to the investigation are entities which received clients’ money and served as conduits or stores of funds for the UT Markets scheme.

We have identified 3 such entities in the UAE (specifically in the Dubai) and a further such in the United Kingdom. One (or potentially more of the UAE entities) appears to have been more closely co-opted in the UT Markets scheme.


Regulatory and Criminal Investigations

Bulgarian regulatory and criminal investigations

The Bulgarian Financial Services Commission (FSC), a regulatory body for the financial and investment industry in Bulgaria, has commenced an inquiry into UT Markets. We have had meetings with the working group within the FSC which were attended also by representatives of the Sofia Police Directorate’s Economic Crime Department.

The inquiry by the FSC has several immediate objectives: (1) to establish whether (and in precisely what way) the persons who set up and ran UT Markets have breached Bulgarian regulation prohibiting the distribution of financial products without a licence or authorisation; (2) to identify funds which were obtained unlawfully which entered in the Bulgarian financial system; and longer term (3) to identify systemic weaknesses in the Bulgarian regulation of financial promotions in forex and binary options trading.

We have requested FSC to provide us with information they discover which may be useful to our work for you. FSC’s staff has confirmed that they will communicate any information generated which they possibly can.

At present, it is unclear when the FSC inquiry will complete and whether it will lead to the identification of specific violations of Bulgarian financial regulations. FSC have notified Bulgarian banks about the possible transmission of unlawful funds through the domestic financial system and we are expecting the outcome of the search for and possible move to freeze bank accounts in Bulgaria. As part of the FSC inquiry, information on the persons involved may also be generated.

The FSC’s own powers to investigate are analogous to those of the Bulgarian police. If FSC determines that UT Markets have been involved in criminal offences, including fraud, the evidence they gather will be provided to the Bulgarian Prosecutor’s Office, who will be able to open a criminal prosecution.

Separately, we have also filed a complaint to the Sofia Local Prosecutor's Office on behalf of our clients in which we have stated information about the possible offences.

We have also spoken to police representatives from the Sofia Police Directorate’s Economic Crime Department, and provided them with all the relevant information at our disposal.

We have prepared to approach the financial supervision authorities in several other relevant jurisdictions.

As yet, we cannot confirm that any of those regulators have started or restarted formal investigations into UT Markets.

Many of you will be aware of the previous web publication of an warning by the UK financial regulator – FCA – about UT Markets on FCA’s list of suspicious fraudulent schemes in December 2015.

As of present date, UT Markets was not present on the FCA’s web-based register of warnings ScamSmart (see http://scamsmart.fca.org.uk/warninglist/search?q=markets).

Factual Matrix: Individual Facts

We are being instructed by an increasing number of UT Markets clients, and are analysing their specific situations one-by-one. As this review continues, we are getting a better picture of the individuals and entities involved. Given that many clients have sent money to or received money from the same legal entities, we are considering a collective (rather than individual) action against them as that would increase the chances of a successful resolution of the matter.

Breach of Contract and Governing Law

The refusal to honour clients’ requests for withdrawal and for termination is in breach of the express terms of the agreement with UT Markets published on the UT Markets website and most probably in the individual client agreement sent out by them (where such was sent out or otherwise came into effect and was applicable to a specific relationship between UT Markets and a client).

However, it is unclear whether in the first place, as a matter of law, clients of UT Markets have entered into a legally binding agreement, breach of which could be sued upon.

The written contract document which we have seen itself does not refer to a governing law, and accordingly which law or laws may govern the client relationship is not immediately obvious and is a matter of interpretation. In such situations, which law is governing is determined by reference to the rules which apply in the judicial forum where a claim is brought. Such rules usually depend on the residence of each client at the time they entered into the contract, and in some cases, on the jurisdiction(s) where “characteristic performance” under the contract occurred.

Separately, over time, the utmarkets.com website contained slightly different versions of what were presented as its Terms of Business. These terms may have specified a legal system, but even so, depending on where any action is taken against the organisers of UT Markets, these may not be applicable.

Even in the absence of certainty as to governing law, actions can be taken under relevant local law against the entities identified - i.e. actions against the agents the money was transferred through, third parties, etc can be taken.

If as a matter of law there is found to not have been a legally binding agreement between you and UT Markets, there will most likely in any event be a different kind of legal relationship and you will be entitled to your funds as a result of the legal doctrine of unjust enrichment.

We will be advising you further on your legal rights in civil law against UT Markets.