Sydney firm linked to suspected scammers investigated, $138m feared lost

An Australian company that extended its financial licence to a group of suspected scammers is under investigation over fears that its failures cost investors $138 million.

More than a dozen Australians claim they were duped by a sophisticated investment scheme called Main Group FX, which appeared legitimate because it had a financial licence.

An ABC investigation into the alleged scam found ghost addresses leading to Caribbean headquarters, a famous Australian cricketer acting as ambassador, and an enigmatic chief executive listed as having alleged connections to terrorism.

The corporate regulator is now investigating the Australian Financial Services Licence (AFSL) provider company that gave the alleged scam legitimacy by making it an authorised representative.

The Australian Securities and Investments Commission (ASIC) regulates financial services providers through a licensing scheme, but these companies can also act as licensors — supplying an effective sub-licence to others who become their authorised representatives.

Sydney-based company MGF Capital holds an AFSL, and its sole director is Matthew Starkey, a former Goldman Sachs trader.

Corporate records show Main Group FX was an authorised representative of the parent licensor MGF Capital between February and December 2023.

It is understood Australians may have lost as much as $138 million from financial products they believed were being offered by multiple authorised representatives under the umbrella of MGF Capital, including at least $2 million from Main Group FX.

It has sparked fears the alleged criminals behind Main Group FX were effectively given a licence to scam.

ASIC told the ABC it was "actively investigating" whether there were "oversight, due diligence, and compliance failures" related to MGF Capital's corporate authorised representatives.

"ASIC is concerned many investors may have been exposed to significant financial losses,"

a spokesperson said.

MGF Capital's Matthew Starkey declined an interview and referred the ABC to a lawyer and crisis PR manager, who denied any due diligence failures had occurred, but would not say what checks had been carried out to allow Main Group to be its licensee.

Monthly dividends arrive late, then not at all

Candice Driver is among 13 investors the ABC knows of who have collectively lost more than $2 million to Main Group FX.

The Sydney marketing executive said she was glad ASIC was investigating, but she had "no trust whatsoever" in the system that allowed the alleged fraudsters to have a financial licence.

The reason she invested with Main Group was because their financial services licence meant they were regulated by ASIC.

"Which, as Australians, we're told to trust,"

she said.

Ms Driver poured tens of thousands into Main Group FX in 2023 believing she was investing in commodities on a trading platform.

By year's end, the company was unravelling, with her monthly dividends arriving late and then not at all.

She could not withdraw her cash and felt staff were "making excuses", with two separate workers claiming they had been slow to respond because their fathers were in hospital.

Another financial authority called in

Ms Driver reported Main Group's licence provider, MGF Capital, to the Australian Financial Complaints Authority (AFCA).

The complaints body acts as an ombudsman for external dispute resolution between financial institutions and customers.

Within days of the complaint, MGF Capital's director, Mr 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.

Main Group's CEO Karim Farag also called her, saying her complaint was blocking company funds.

That was the last she ever heard from Mr Farag, who has since been accused of having alleged links to a terrorist organisation.

Main Group's investment portal shut down, emails bounced, and staff became uncontactable. It was eventually deregistered.

Mr Starkey said in a statement that his firm "had no contact with any of the perpetrators of the [alleged] scam", but could not explain how Main Group staff knew about Ms Driver's AFCA complaint.

Complaint still with AFCA

Years later, Ms Driver and Mr Starkey are still locked in a long-running AFCA dispute.

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.

Junru Sun is listed as a director of several other companies — Highstone Capital, which was also an authorised representative of MGF Capital, and a ceiling business in Western Australia.

Ms Sun told the ABC she had no idea how her name ended up on these documents.

In his statement to the ABC, Mr Starkey claimed Ms Sun "met the relevant regulatory requirements" to direct an authorised representative.

The directorship then switched to Australian-Lebanese woman Robin Mahfouz, who is now based in Lebanon and has refused to speak to the ABC.

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

Company cancels itself out of 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.

Being an AFCA member is optional if licensees are only dealing with "wholesale" clients, meaning sophisticated investors or big companies, rather than "retail" investors or "mum and dad" types.

MGF Capital's representatives were only authorised to provide wholesale advice.

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

"I was completely gobsmacked."

AFCA said their 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.

AFCA powerless to help other victims

Other investors missed out on the chance to pursue MGF Capital through the financial ombudsman.

Adelaide man Lewis Murray lost $390,000 to the alleged criminals behind Main Group FX and tried to lodge a complaint in early 2024, but MGF Capital had already withdrawn its membership.

Perth retiree Jean Giles had to sell her home after losing $176,000 to Main Group FX.

She was also too late reporting to AFCA.

They are among a small group of investors considering a class action against MGF Capital, in lieu of them not being able to lodge their own complaints with AFCA.

AFCA and ASIC both declined to comment on Main Group investors' allegations of regulatory failure.

More than just resume checking needed: expert

Sean Graham, of compliance advisory business Assured Support, said this case raised important due diligence questions.

He said AFSL providers were obligated to ensure their representatives were competent and complied with the law on an "ongoing basis".

Companies could not simply appoint a representative and think of it as "game over".

"As a licensee, your obligation doesn't end the moment I check your resume,"

Mr Graham said.

Mr Graham likened some AFSL providers to "franchise models", where they appointed representatives en masse — like Lanterne Fund Services, which ASIC shut down in 2024 for running a "licensee for hire" business model.

Not the first alleged due diligence failure

In 2022, a company Mr Starkey co-directed — now-defunct cryptocurrency exchange, Mine Digital — landed in the Victorian Supreme Court for allegedly allowing scammers onto its platform.

A self-managed super fund sued Mine Digital after losing $1.6 million to a UK-based investment firm, which turned out to be "not a legitimate one", the court heard.

The super fund alleged the scam company used the cryptocurrency exchange as an Australian "intermediary" to facilitate money transfers.

The super fund claimed Mine Digital should have done more to vet the fake investment company before allowing it to use their services.

Mine Digital went into liquidation owing $16 million to creditors, effectively ending the lawsuit.

MGF Capital still operating

MGF Capital is now called Trade Prime and continues to authorise licensees, one as recently as last month.

Since MGF Capital's inception in 2017, it has authorised 136 representatives, though many are no longer active.

Mr Starkey claimed it was "critical to distinguish" between the Main Group his firm authorised and a separate group of scammers that impersonated the company.

The ABC has not encountered any evidence suggesting there were two separate groups, and Mr Starkey did not provide further information when asked.

Mr Starkey said Main Group FX was only authorised to provide financial advice to "wholesale" clients, while the alleged victims would be considered "retail" clients under the law.

MGF Capital "is appalled by, and deplores, the [alleged] scam," his statement said.