Rich listener Andrew Budzinski is facing a class-action lawsuit over allegations that IC Markets misled investors

One of Australia's richest men, Andrew Budzinski, is facing a class action lawsuit over allegations he and his company IC Markets misled thousands of everyday investors who collectively may have lost hundreds of millions of dollars trading risky financial products.

Echo Law filed a class action lawsuit against Mr. Budzinski and IC Markets in December, expecting that thousands of investors who lost money trading the products – called contracts for difference (CFDs) – might come forward.

CFDs are financial products that allow people to trade on how much assets – such as cryptocurrencies, stocks and commodities – gain or lose in value.

They are illegal in the United States and Hong Kong, but can be traded in Australia, although corporate regulators imposed strict restrictions on these products in 2021.

The class action lawsuit alleges that IC Markets engaged in misleading, fraudulent and unscrupulous conduct by offering these highly risky and unsuitable financial products to retail investors (prior to the ASIC restrictions coming into effect on March 29, 2021).

IC Markets was founded in 2007 by Andrew Budzinski, who was ranked 50th in Australia's 250 richest companies in 2022 with assets of $2.5 billion.

The 49-year-old has increased his wealth through foreign exchange and cryptocurrency trading.

IC Markets is headquartered in Sydney, although Mr Budzinski reportedly now lives in a luxury port on the south coast of Cyprus.

CFDs are financial products that allow people to trade on how much assets – such as cryptocurrencies, stocks and commodities – gain or lose in value.(ABC News: John Gunn)

IC Markets posted net profits of nearly $1 billion in three years. Court documents filed by the plaintiffs show that Mr. Budzinski paid himself at least $939 million in dividends through his holding company, Bud Corporation.

These represented 99 percent of the profits IC Markets made in the three years ended September 30, 2020, the documents said.

The allegations against the company involved investors who purchased CFDs from IC Markets between December 2017 and March 28, 2021.

The court documents allege that Mr. Budzinski had “extensive control and management of the operations and business of IC Markets” and considered himself an “owner.”

The court documents also include emails that Mr. Budzinski sent to company employees in 2022, after the period of alleged conduct, in which he implied that the money paid by IC Markets to his employees was “his” money, and in which he threatened not to pay employees their wages.

The court documents say that on February 16, 2022, Mr. Budzinski sent an email that said: “The company does not employ fagots (gay people)… I pay your wages and those of others and would fund the lifestyle of fags …Why didn't you do that?” Tell me that you planned to offer a job to a gay man who was later hired and has now been fired” and that he was outraged “that my money was given to such a person.”

They also allege that in September 2022, Mr. Budzinski instructed IC Markets not to approve or pay wages to employees in Australia until he had reviewed the employee's performance.

According to court documents, Mr. Budzinski's instructions read: “Approve payroll. I just want to remind you that all employee payroll must be received by me for approval this month for all offices including AU. Four employees will have their salaries withheld until this point.” They complete the assigned task in a professional manner. These people know who they are. If the assigned task is completed satisfactorily, your salary will be released. This is not a threat. THAT WILL HAPPEN.

An IC Markets spokesperson told ABC News: “The claims in this case are completely without merit and will be vigorously defended.”

It said: “The CFD products always comply with all regulations and we are proud to provide efficient, honest and fair services to our customers.”

“This case is simply the latest in a series of class actions against all CFD brokers in Australia, driven by plaintiffs’ lawyers and litigation funders,” the spokesperson said.

“It has absolutely no impact on our current operations and will have no impact on our customers or our overall business.”

CFDs “similar to gambling”

Idil Mohamud, senior associate at Echo Law, said retail investors who purchased CFDs from IC Markets between December 2017 and March 28, 2021 can learn more about the class action and register their interest.

“CFDs are very volatile and have historically been highly leveraged products, exposing investors to rapid losses,” she told ABC News.

Idil Mohamud says CFDs expose investors to quick losses.(Delivered.)

On March 29, 2021, corporate regulator Australian Securities and Investments Commission (ASIC) issued a product intervention order imposing strict conditions on providers to protect retail investors.

The limits followed a series of ASIC reviews in 2017, 2019 and 2020 which found that most retail customers lose money when trading CFDs, noting that they were “confusing” and had “gambling-like” characteristics .

Do you know more?

If you have any further information on this story, please contact Nassim Khadem at [email protected]

Documents filed in the Federal Court, covering a period of three years before the ASIC restrictions came into effect, allege IC Markets “set the buying and selling price for its CFDs in a manner that was not transparent to retail customers.”

It said the company “sold highly leveraged CFDs to retail investors that were complex, extremely risky and unsuitable for those investors.”

The company's website and operating platform “facilitated poor decisions and encouraged continued trading, regardless of significant or repeated losses.”

IC Markets, the applicants claim, “made it easy for retail investors to open an account and start trading; emphasized the simplicity and speed of trading and minimized the risks”.

The company, it is claimed, “used language that made new users feel comfortable, such as: B. Representations that users could “trade with the world's largest Forex CFD provider” and “trade with the world's most trusted CFD provider” and did not contain any prominent content warnings about the risks of CFDs.”

ASIC's August 2019 review found that CFDs are generally marketed to and traded by retail investors, 70 percent of whom earn an annual income of $80,000 or less.

After ASIC introduced new rules for the issuance and distribution of CFDs in 2021, investors' losses were limited.

Immediately after the new rules were implemented, losses fell to an average of $33 million per quarter, well below the average of $371 million per quarter the year before.

ASIC has successfully brought three proceedings against CFD providers AGM Markets, OT Markets and Ozfin for breaches of the Corporations Act after Federal Judge Jonathan Barry Beach handed them a total fine of $75 million in October 2020 for “systematically unscrupulous conduct”. .

At the time, Judge Beach described CFDs as “financial heroin hits” sought by inexperienced investors.

Investors “still collecting pieces of their lives”

Ms Mohamud said investors in her class action were affected before the ASIC limits came into force.

She said one of the investors represented by the law firm lost about $50,000 and was financially devastated.

“Investors were not properly informed about the nature of the transactions,” she said, noting that tens of thousands of investors lost potentially hundreds of millions of dollars during that period and many of them traded on debt such as credit cards.

“They're still collecting pieces of their lives … and continuing to service the debts they've incurred,” she said.

She added that while some investors feel shame and guilt about investing with IC Markets, “they didn't know the odds were against them.”

While the company requires investors to fill out a questionnaire when investing, the court documents allege IC Markets did not take sufficient steps to warn people about the risks they faced.

Lead applicant Nathaniel (who requested that his last name not be used) says he feels he was not adequately warned about the risks.

At the time of the investment he was 26 years old.

Nathaniel says if there had been clear warnings about the risks of trading before he invested, he wouldn't have gotten in.(Delivered. )

At the beginning of 2020, he temporarily resigned from his job as an assistant director in the film industry during the Corona lockdowns.

He says he lost $10,600 in October 2020 because he purchased contracts for differences through the IC Markets trading system.

Although he had some experience trading company shares on the ASX, he said: “Within two and a half weeks the money I had invested was all but gone – around 90 per cent was wiped out.”

Nathaniel says if there had been clear warnings about the risks of trading before he invested, he wouldn't have gotten in.

He observed an IC Markets trader he followed in a Facebook group he thought was reputable.

That trader, says Nathaniel, apparently doubled his money over a 30-day period, and many other members of the Facebook group also invested with IC Markets as a result.

“We set it to copy someone’s trading actions,” he says.

“I watched and waited for a month before jumping in – I would be an idiot to jump in straight away on a whim.

“I assumed it was an account that was doing well and … took that as a sign.”

But Nathaniel feels he was tricked into joining a platform he thought was safe and regulated.

He says he lost part of the deposit he had saved to buy a house with his girlfriend at the time.

“From a financial perspective it was a success. Emotionally it was very stressful. It affected my relationship at the time. Because there is a lot to lose.”

“It would be nice to get (the money) back.”