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Sale or return of shares under consideration, but full repayment 'almost

Failed brokerage Forluxe Securities and its margin financing arm, which had 526 clients, is suffering a shortfall of almost $40 million, according to the provisional liquidator.

Nick Hill, of Nelson Wheeler Corporate Reconstruction and Insolvency, yesterday gave the liquidator's first report to creditors showing the broker received claims for client shares of up to $56.29 million compared with $17.05 million in shares held as of June 1.

This left a shortfall to clients of $39.24 million, he said.

A winding-up hearing has been set for tomorrow and another hearing is scheduled for July 21 to decide how to distribute the remaining shares held by the firm to clients.

Nelson Wheeler may return the shares to the clients or sell the shares and divide the money among the clients on a pro-rata basis.

'The shortfall is such a large amount that it is nearly impossible for all clients to get a full repayment,' Mr Hill said.

He said a preliminary investigation found the shortfall arose because clients' shares held in the broker's account in the Central Clearing and Settlement System were alleged to have been illegally transferred to the margin finance arm, Forluxe Finance.

Forluxe Finance is alleged to have used those shares as collateral for financing from various banks, and loans amounting to about $40 million were credited to bank accounts linked to missing Forluxe boss James Mui Kwong-nok and his brother Gordon Mui Kwong-yin.

The Mui brothers disappeared on May 4 and are being sought by the Commercial Crime Bureau.

The provisional liquidator has secured an injunction to freeze the assets of the brothers and James Mui's wife Peggy Lee Yui-pin.

Mr Hill said the action had frozen three Hong Kong properties, which still have mortgage loans due, belonging to the family. This means the family has few assets on hand that could potentially be returned to clients.

He said the firm had a broker seat that could be worth up to $5 million and has been put up for sale by tender.

Mr Hill said about a dozen parties had expressed an interest in the seat.

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