The COVID-19 outbreak has forced Victoria-based foreign-exchange firm EncoreFX to seek creditor protection.
The company, founded by Peter Gustavson and Paul Lennox, suspended its trading activities Monday and put itself under the administration of Ernst & Young, as it faced a growing number of customers and companies defaulting on credit vehicles.
In a letter to clients, EncoreFX said it had no choice, with customers defaulting on their obligations due mainly to the rapid changes in the foreign-exchange market caused by the pandemic.
鈥淔urther, certain of our customers, including those that owe substantial amounts to EncoreFX, have notified us that they themselves are entering foreign administration proceedings that will prevent the timely payment of amounts due to EncoreFX,鈥� the letter said.
Under the control of Ernst & Young, the company will consider all options available. 鈥淲e also sincerely regret and are saddened by the significant impact these events and actions will likely have on EncoreFX鈥檚 180 employees and their families, especially at this time of the global pandemic,鈥� the company said.
EncoreFX has filed an assignment in bankruptcy on behalf of its 91原创 operations and opted for voluntary administration for its operations in Australia and New Zealand.
Gustavson and Lennox sold Custom House Global Foreign Exchange to Western Union in 2009 for $370 million. They started EncoreFX after their five-year non-compete agreements expired.
Both companies claimed what set the firms apart from others in the foreign-exchange game was customer service.
鈥淚n the FX industry, there is a lot of automation, especially for small and medium-sized enterprises,鈥� Gustavson said in a 2017 interview with the Times 91原创. 鈥淲here we have differentiated [ourselves] is the banks have stopped giving personal service.鈥�
Most of the company鈥檚 clients were importers and exporters doing $10 million to $50 million in foreign-exchange transactions a year.
Custom House was founded in 1992. When it was sold in 2009, it was considered one of the world鈥檚 largest non-bank foreign-exchange companies, doing billions of dollars in transactions.
EncoreFX opened initially with five 91原创 locations, 30 employees and a Victoria administration office. There are now 15 locations in Canada, Australia and New Zealand.
