Victims of the USFIA investment scheme are on track to recover about 75% of their lost funds, according to the latest estimates from the court-appointed Receiver. This projection stems from the Receiver’s July 7th Joint Status Report, which details the ongoing efforts to sort through thousands of claims.
Approximately 8,000 claims have been filed against USFIA, representing a total loss of $123 million. A significant portion of the current work involves clarifying claims submitted by individuals purporting to represent multiple other investors. These bulk claims are considered legitimate but require careful verification before they can be fully processed. The Receiver does not anticipate a substantial change to the total loss figure once these are resolved.
As of the July report, $11 million in claims remained under analysis. The Receiver’s current estimation of a 75% recovery rate hinges on the cash available within the receivership estate and the total amount of approved claims. This calculation assumes that any tax-related claims will be subordinate to investor claims.
The Receiver expects to complete the claims determination process by the end of August, a timeline that accounts for an additional eight weeks of work. Following this, a formal motion will be filed by September 11, 2020, seeking court approval of the Receiver’s recommendations on which claims are allowed and which are to be disallowed.
Simultaneously, the Receiver will request approval for a plan to distribute the estate's funds to those with valid claims. The goal is to begin making distribution payments by the end of 2020, provided all procedural steps proceed as planned.
A potential obstacle to timely distribution is the matter of income tax liabilities. The Receiver is using forensic accounting data from December 2019 to prepare pre-receivership tax returns for USFIA entities for the years 2014 and 2015. Preliminary estimates suggest a tax debt of $20 million. However, the Internal Revenue Service's classification of certain expenses could potentially push the tax liability higher than the funds available for distribution.
This situation bears a resemblance to the TelexFree case, where the IRS initially asserted a claim exceeding the available assets for victim restitution. While the TelexFree IRS claims were ultimately resolved in favor of the victims, the outcome for USFIA remains uncertain. Regardless of the final tax amount, the Receiver plans to seek court authorization to subordinate any tax claims to investor claims until all investors have been fully repaid. Resolving this tax issue and securing subordination is considered critical before any distributions can be made.
An update filed on August 20th revealed that 8,088 claims totaling $134,838,589.07 had been submitted. The Receiver indicated plans to object to claims amounting to $45,303,628. No significant new information regarding the tax issue was provided in this filing.