The USFIA Receiver estimates that victims will recover approximately 75% of losses.

In total there are around 8000 USFIA victim claims, totaling ~$123 million in losses.

The hold up at the moment is sorting out claims made by one claimant on behalf of others.

Those claims appear to be legitimate but need to be clarified. The Receiver states that once sorted, he doesn’t expect the $123 million figure to significantly change.

As of the Receiver’s July 7th Join Status Report, there are $11 million in claims left to be analyzed.

Based on the cash on hand in the receivership estate and the projected total amount of allowed claims (and assuming the tax claims discussed below are subordinated), the Receiver currently estimates investors will receive a distribution of approximately 75% of their net losses from their investments.

All up the Receiver estimates determination of outstanding claims will take another eight weeks.

The Receiver, therefore, expects to conclude the processing of claims by the end of August.

The next step will be to prepare a motion for approval of the Receiver’s recommendations regarding allowed claim amounts and claims to be disallowed.

The Receiver anticipates filing this motion by September 11, 2020.

The Receiver will simultaneously seek approval of a proposed plan of distributing receivership estate funds to those with allowed claims.

Ideally distribution payments will go out by the end of the year. That is of course assuming everything goes to plan.

One issue in the way of distribution payments is income taxes.

The Receiver is using the forensic accounting completed in December 2019 to complete the pre-receiver tax returns for the Receivership Entities for 2014 and 2015.

The preliminary estimate of taxes owing is $20 million. However, how the IRS treats certain expenses could conceivably result in tax liabilities that exceed the amount of cash held by the Receiver for distribution.

This sounds similar to the TelexFree IRS drama, wherein the IRS initially claimed over and above what was available to pay victims with.

TelexFree’s IRS claims were resolved in favor of victims, I can’t say for sure but I’m assuming we’ll see the same outcome for USFIA.

Regardless of the amount of taxes owing, the Receiver will seek to subordinate tax claims to investor claims until all investors are paid in full.

It is critical that the tax claims be addressed and the subordination issue resolved prior to distributing receivership estate funds to investors and creditors with allowed claims.

Pending further updates from the USFIA Receiver, stay tuned…

 

Update 21st August 2020 – The Receiver’s Nineteenth Interim was filed on August 20th.

In it the Receiver notes that

to date, 8,088 claims with a face amount of $134,838,589.07 have been submitted.

As of the writing of this Report, the Receiver plans to object to claims with an aggregate total of $45,303,628.

No significant update on the tax issue.