foreign currency exchange rate - under SOA rate you're shafted

  • podather
  • 10/10/08 31/05/09
  • a depositor
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Posted: Sat, 14/02/2009 - 01:08

I have just read the latest affidavit from Alix Partners regarding the scheme of arrangment and the currency of payment.
Under the SOA All depositors will receive payment in sterling and the rate of exchange will be that of the 9th october 2008.
Any depositor with a foreign currency account will loose out significantly under this arrangment as opposed to an exchange rate calculated on the date of liquidation as advised previously by Mike Simpson.
For dollar account holders this means approx £15,000 less sterling per $100,000 dollars deposited and around £12,000 less per €100,000 euros deposited between the rates on the two dates.

The decision as to which option is preferable is one requiring some thought but I cannot see how there can be such a disparity between the dates proposed for calculation of foreign currency exchange rates between the SOA and liquidation and DCS.
Mike Simpson stated that case law would dictate that the rate would be that on the date of liquidation as opposed to the date of licence suspension now proposed in the SOA.
Due to the dramatic fall in the value of sterling between these two dates any depositor with significant foreign currency reserves could be forced into voting for the scheme with the more favourable exchange rate as opposed to the most favourable scheme for overall recovery

I believe the london team were pushing the IOMG for clarification on this point and which date would be used, I assume that this has been resolved and under the SOA the date is the 9th October.
Can we get Mike Simpson to confirm the date if the bank is liquidated as I believe it was english case law he referred to so foreign currency depositors can take this fact into account when and if deciding on which of the two options they believe the most favourable.

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US Dollar Excahange Rate

  • Chairman2
  • 12/10/08 31/05/09
  • a depositor
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  • Mon, 16/02/2009 - 19:07

THis letter was sent to IOM Newspapers, Radio and all members of IOMG.

Would you be kind enough to print this letter on your site. This letter is also being sent to Manx Radio and all members of IOM Government, in an effort to try and wake up the IOMG to do something positive to rid us of this dreadful nightmare that we find ourselves in due to no fault of our own.

I thank you for reading this email and to do the right thing please print, many thanks.

Kind regards,

Dear Sir,

We are depositors of KSFIOM. Four the last four months we have been living through an absolute nightmare. Our total life saving of $550,000 are in jeopardy of being lost The IOMG via Tony Brown at the TSC meeting in London accepted total responsibility for resolving this matter. We want 100% return of our own money which leads me to the point in writing to you.

My wife and I are 65 years old and retired last September. Our deposit in KSFIOM is in US Dollars and when our money is returned to us, we will need it to be in the same currency.

The recent details published regarding the SoA states that the IOMG are proposing that foreign currency deposits are to be paid out in £ sterling and the exchange rate will be calculated as of 9th October 2008, when it was $1.76 to £1.00.

For goodness sake how much more distress do you intend putting us through? How much more do you think we can take? Your proposal immediately reduces our funds by a total of 22%.

The figures:

• $550,000 converted at $1.76 to £1.00 (9th October 08) = £312,000

• £312,000 converted back to USD at $1.38 to £1.00 = $430,000.

• LOSS = $550,000 minus $430,000 = $120,000 (£87,000) = 22% lost from our savings.

Following Tony Browns pathetic performance at the TSC meeting and now this immoral exchange rate proposal, we have lost total faith in IOMG to show the teeth and moral responsibility to find a solution to our plight.

Please do something positive IOMG, your future is at stake, just like ours.

This whole crisis would be resolved if you took a deep breath and stepped up to the plate and arranged a loan from HMG to settle all depositors for 100%.

Every country involved in this crisis has done just that; it is now your turn IOMG. Show us all that you really do care about KSFIOM depositors and for the future of the IOM.

Yours faithfully,
xxxxxxxxxxxxxx


He did confirm that the

  • frog
  • 10/10/08 13/09/09
  • a depositor
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  • Mon, 16/02/2009 - 17:31

He did confirm that the exchange rate will be fixed at date of liquidation.

Note that in the previous submission of the SoA, the exchange rate date was May 15th (or the week of). This has significantly reduced the benefits of SoA (if there were any at all) and I for one will be voting against it.


Exchange rate

  • desparatedan
  • 12/10/08 31/05/09
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  • Mon, 16/02/2009 - 06:37

I am still a little confused regarding the exchange rate issue.
I am a <50k depositor based in South Africa and decided to withdraw a large proportion of my sterling funds at the beginning of October 2008. This was to take advantage of the weak rand against sterling which stood at R18 to GBP1at the time of withdrawal.
In the event we receive any payment from the liquidation of KSFIOM or proposed SOA, does this mean we would receive payment in sterling using the exchange rate prevailing as at 09 October 2008 or at date of liquidation, ie currently around R14 to GBP1 or a loss of around 22%?


Exchange Rate - Desparate Dan

  • podather
  • 10/10/08 31/05/09
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  • Mon, 16/02/2009 - 11:16

BY what you said your money was deposited in KSF IOm as Sterling.
You choose to withdraw it to take advantage of the exchange rate as it was beneficial to you at that time but withdrew sterling and your bank converted it to rand on receipt
Your deposit wil remain in Sterling and will be converted on receipt into your nominated account by the receiving bank at that days rate.
The exchange rate issue only relates to depositors who had deposits in a non sterling currency
Under the SOA the IOMG have decided to convert your deposit for you and use the rates on the 9th October to do this.
These rates are significantly worse that the current trading rates on the currencies you could save in therefore all depositors
with dollar or euro accounts get far less sterling back for there currency than they would if todays rates were used.

The exchange rate issue does not apply to you, but the movement in the rand/sterling exchange rate will affect the converted value in rand of your deposit while your funds are frozen.
This applies to all depositors saving in sterling but then converting to another currency upon withdrawal, lucky for most sterling has weakened significantly over the months since this happened so they will receive more in local currency once converted.


X change rates

  • bobwin
  • 23/12/08 n/a (free)
  • a depositor
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  • Mon, 16/02/2009 - 07:45

The latest version of the SOA says the exchange rate to be used was that at 9 October.
This would be good for you as the rand has weakened since then.
Most foreign currencies have strengthened against the GBP which is why many are unhappy with 9 Oct rates.
Liquidator provisional says he will use rates at liquidation which appears to be bad for you if you now only get 14 Rand for 1 GBP.

Hope i have explained correctly

Regards


Comment on comment by bobwin: X-change rates

  • Anonymous
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  • Mon, 16/02/2009 - 17:57

The SA Rand has nothing whatsoever to do with the exchange rate on 9th October or any other date because the deposit was in Sterling and the payout will be in Sterling.
The exchange rate issue relates to deposits taken in other currencies with a payout in Sterling: In such cases the SoA should not be at a disadvantage - the same date for currency conversions should be used as for the DCS. This is not so at the moment but one would hope that the SoA will be amended to be at least on a par with the DCS.


Theft from foreign currency accounts

  • Bottom Dollar
  • 17/10/08 31/05/09
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  • Sat, 14/02/2009 - 11:44

The idea of the SoA setting the xrate at 08 October levels is clearly an intentional attempt to try and limit payments to foreign currency account holders to leave more money in the pot overall. Did they think we wouldn't notice?

This is theft.

USD $250K is USD $250K
60% of USD $250K in GBP is now £105K
60% of USD $250K in GBP on 08 Oct was £86K

This is just one depositor's personal example. But in this case, under the SoA, nearly £20K is being short-changed (not to mention the 40% assumed unrecoverable).

It is total injustice and must not be allowed to happen. How can this travesty be made more public? I fear that after this initial spate of outrage, the foreign currency holders' plight with be overlooked.

I am for liquidation. I wasn't before, but I am now.


The exchange rate is always against you

  • Anonymous
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  • Sat, 14/02/2009 - 11:31

Having lived and worked in many countries during the past 20 years I've given up on exchange rates, you're always in the the wrong currency! Whilst the rate last October seems to be the wrong one at present, with payments being anticipated over a two year period there is just as much chance that it could be advantageous. Sterling has moved within a 10% range this month alone. I don't think exchange rate should be the main factor in choosing DCS or SOA.


@lancara: "...always against you..."

  • follow_the_tao
  • 11/10/08 31/05/09
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  • Mon, 16/02/2009 - 05:17

I understand your perception "betting on currencies is a mug's game".
But this case is different. Our deposits are being converted to sterling and there they will stay.
You do not have to choose between the SoA or the DCS, You can choose liquidation, without the DCS.

As I just said a moment ago, we are going round in circles here.

Unless we get the facts straight how can we decide? We need to make an effort. I'm going to write to frog.


SoA and DCS and Bond Holders

  • chipmunk
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 16/02/2009 - 17:57

I really cannot get my head around the Voting rights and where Insurance Companies stand....and just how their decision will effect us all.

They hold I believe over 300 million Pounds, a big chunk and it seems that under the DCS they get virtually nothing so surely they will all opt for the SoA ....and with 30% of total assets where does that put the rest of us regarding our voting strength....does that make sense ?


FX date a significant factor for non GBP account holders

  • columbgc
  • 11/10/08 14/07/10
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  • Sat, 14/02/2009 - 11:46

I am not in full agreement with you lancara. I don't think many of us will willingly give-up on 20% from the start on a very unlikely scenario with sterling recovering on October 9 levels. I also remember that when the initial SoA proposal was put forward, the FX date was something DAG stressed-out to Alix. We are entitled to a better and explanation of why they have not acted on this request.


Currency Exchange Date. Can the London Team please verify!

  • klauseriksen
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 09:20

I am not sure if you have read old information as this is not the same as I was told by the DAG. What I was told was that in the latest version of the SOA the exchange calculation date of an SOA would be set at the date the scheme would start i.e. sometime in the future.
If the 9th of October was used for the SOA then smaller foreign currency depositors with < 50 £K would actually get LESS in the SOA than they would get in the DSC. This would therefore not be in line with the requirement that ALL depositors would receive the same or more in an SOA than they would in a DSC


Foreign Currency Account Ripoff

  • jkk
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 09:52

Klauseriksen, there is no need to involve our brave overworked LondonTeam. Lovett's affidavit spells it out without any ambiguity.

4.1 All Scheme claims will be paid in sterling. (...) All non-sterling claims will be converted into sterling at the mid-market rate (...) on 9th October 2008.


@jkk: "All scheme claims...."

  • follow_the_tao
  • 11/10/08 31/05/09
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  • Mon, 16/02/2009 - 05:03

Surely as it's in Lovett's affidavit it refers to claims under the SOA?

Frog seems certain that under normal liquidation rules it's the date of liquidation, not administration (provisional liquidation?) And he has spoken to MS the most.

We appear to be going round in circles here.

My guess is that the SoA is not the best choice for the average foreign currency holder. I don't think we have put in enough thought identifying the profiles of the different groups, the IoMG I would guess has. The scheme is for their voters, not for us. Therefore I am against the SoA.

We can work figures, and we should, if you want.


power of the Deemster?

  • sambururob
  • 10/10/08 n/a (free)
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  • Sat, 14/02/2009 - 12:03

Forgive my ignorance.
What is the power of the deemster?
Can he go along with the main arguments in the IOMG affadavit but alter the exchange rate date to Feb 19th or say that the IOMG cannot clawback until 70% has been recovered etc?
I am looking for a ray of optimism.
I trust the deemster not to be a pawn of IOMG and hope he will exercise his power to the full.
From his last hearing I believe he is someone who understands the inequity of the position we find ourselves in and will deliver a judgement as much in our favour as the finances/politics of the situation allows. How constrained is he?


Our Hope in the Deemster

  • jkk
  • 10/10/08 31/05/09
  • a depositor
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  • Sat, 14/02/2009 - 12:44

Next Thursday the Deemster will have to chose between the liquidation and the SoA as proposed by IoMG/Alix.

He might also give IoMG more time to define their SoA in even more detail but that is unlikely as the scheme is very precisely spelled out in Lovett's affidavit and the Deemster was not amused at their stalling tactics at the last Court session already.


Our Hope in the Deemster

  • Anonymous
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  • Mon, 16/02/2009 - 06:17

jkk: Yes, it is spelled out in the exhibit to Lovatt's affidavit, as you rightly say, but not only is the SoA not in its final form (an agreement, consisting of all the terms and conditions) but it states at the outset that the terms are "indicative" only and also not inclusive.

It seems to me quite clear that it cannot be voted on in its present form (and indeed that is recognised in the IOM's affidavits) and it may also not be enough to persuade the court to order that there be a vote on a further-developed particularisation of the SoA (ie. the actual scheme), because the court would then be ordering that there be a vote on the adoption of a scheme the particulars of which it has not yet had sight of and which in fact appear not yet to exist.


Our Hope in the Deemster

  • Anonymous
  • Offline
  • Sat, 14/02/2009 - 13:35

(a) The Deputy Deemster is Andrew Corlett:

http://en.wikipedia.org/wiki/Andrew_Corlett
and
http://www.iomtoday.co.im/news/Corlett-takes-over-as-deputy.3070538.jp

(b) The Attorney-General, who has been putting the case for the IOMG Treasury, is John Corlett:

http://en.wikipedia.org/wiki/John_Corlett
http://www.iomtoday.co.im/politics/KSF-40IoM41-winding-up-is.4738984.jp

Don't let the similarlity in their names confuse you. One represents a party in the proceedings and is strongly promoting the SoA. The other is the judge in the proceedings. I mention merely in passing that, as it happens, it appears that they are also brothers. I gratefully acknowledge a member of the London (legal) team for first drawing this to my attention.


deemster doom

  • Anonymous
  • Offline
  • Mon, 16/02/2009 - 06:38

Isn't this situation wrong?


One would think

  • bellyup
  • 10/10/08 09/01/10
  • a depositor
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  • Mon, 16/02/2009 - 10:26

One would think conflict of interest but on that little rock I imagine everyone is related to everyone else.


deemster doom

  • Anonymous
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  • Mon, 16/02/2009 - 07:09

It's a little unusual.

I wondered when someone would notice that.


Our Hope in the Dumpster

  • jkk
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 20:02

Ouch!! Then, I suppose, we are stitched, aren't we?

But wait, I for example never had harmonious relations with my siblings, so perhaps not all is lost yet?


This is not acceptable

  • Anonymous
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  • Sat, 14/02/2009 - 11:14

We had kept our funds in Japanese Yen because we foresaw the strength of the Yen. Within around two months from now when I see the rate falling below 100 it would mean our deposit is likely to have halved in value. As you can imagine we'll be voting against an SoA on this basis.


shogun doing fine

  • Anonymous
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  • Mon, 16/02/2009 - 06:35

The yen - sterling rate was 176 yen to the pound on 9 Oct. Today it is 133 yen. The yen has a long way to go before it weakens beyond the October rate. You are doing just fine. Good move keeping your money in yen. Wish I'd done the same. Don't understand what is it that is unacceptable to you. Want to change places?


Vote against the SOA

  • klauseriksen
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 10:34

In that case I am definitely voting against the SOA. Seems like IOM is trying to pull a fast one on us and that they have not been doing this in good faith all along. I myself have >£50K in Euros and US$ and stand to lose an additional 20-25% on top of the other expected loss. Smaller foreign currency holders with less than £50K equivalent will actually get LESS from the SOA than they would from the DSC as it stands so this completely goes against the originally stated requirement of the SOA that everyone would get the same or more than in the DSC


LondonTeam, Can You Help?

  • jkk
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 11:35

I think we can't afford to wait for the vote. We need to petition the Court to end this farce NOW, on 19 February. The government has been acting in bad faith all along and is actually proposing LESS money now than in the liquidation and the DCS combined.

LondonTeam, can you help us prepare the petition? This nonsense has been dragging on for too long, way too long.


The bank holds USDollars ?

  • coldlightofday
  • 20/10/08 31/08/09
  • a depositor
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  • Sat, 14/02/2009 - 01:22

This date of conversion issue is mind-bending, especially as I believe I heard that some of the cash currently held by the bank is in US Dollars?
This might be a silly question but how and when would the actual foreign currency held by the bank be "valued"?


The bank holds US Dollars - Shafted twice...

  • podather
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 10:57

If I recall the bank currently has around $58 million in US dollars as cash.
This would be converted as and when at the current market rate. approx 1.45
If the date from exchange rates in the SOA remains the 9th October I calculate they will benefit to the tune of around £8.7 million pounds between the rate used to calculate the amount of sterling returned to dollar depositors and the amount of sterling realised by converting the dollar assets of the bank when required.

So they think they can use this opportunity to shaft us all again......

Why if they have dollars cant they pay dollar depositors back in dollars.
Even over a number of years with exchange rate fluctuations taken into account there is no doubt the rate on the 9th October is at an historically high level and offers a significant benefit to the bank to the detriment of all foreign currency depositors.

How can they think you would vote for a SOA which punishes you so excessively if you had non sterling deposits


Forex a/c holders subsidise the rest?

  • coldlightofday
  • 20/10/08 31/08/09
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  • Sat, 14/02/2009 - 15:32

Podather, re The bank holds US Dollars - shafted twice

The estimated £8.7 million difference between rate used to calculate the amount of sterling returned to dollar depositors and the amount of sterling realised by converting the dollar assets of the bank when required, looks like an unintended subsidy of sterling account holders by forex account holders?

It does not seem to be in the spirit of 100% return for all!

Do we know the total value of forex accounts by currency?


Forex accounts

  • rapata
  • 13/10/08 03/08/09
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  • Sat, 14/02/2009 - 18:15

I requested the question be asked of Mike Simpson of how many foreign currency accounts there are and the total amount of these account, but the questions were not included on the list. The last call did have a question about the make up of accounts, to which MS said the information would be posted on the website - which website and when?????

We need to know the total amounts of the forex accounts. MS has stated he has recovered over 50 Million dollars. These funds should be reserved to pay back dollar depositors until such point as they are all paid out, and if there are insufficient dollars to pay out the claims only then should a conversion be made, at the prevailing rate of exchange when payments are made. There has been no information on Euro accounts, but the same would apply.

As exchange rates stand right now we would be subsidising sterling depositors, but if in the next 2 or 3 years rates change the other way (highly unlikely, but if we had crystal balls none of us would be in this mess today) then Sterling depositors would have to subsidise dollar depositors. Either way is grossly unfair, the only way to deal with forex accounts is to pay them back in the currency in which the deposits were held on the same percentage as any other depositor.


FX conversion date - a red herring

  • kiwi38
  • 11/10/08 31/05/09
  • unspecified
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  • Sat, 14/02/2009 - 15:53

I don't want any conversion date. I want my euros back. If we get robbed of 40%-50%-60% or whatever then I want that percentage of my euros back. Why should I take another 20% loss on top of the existing pain? Coldlightof day is correct - it would effectively be a subsidy by all FX account holders to the Sterling account holders (as the rates currently stand). Do you all want to inflict more pain on us? No one should win or lose from the FX issue - we should get back the pro-rata amount in our deposit currency.


The SOA must be illegal is the DAG legal team investigating?

  • klauseriksen
  • 10/10/08 31/05/09
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  • Sat, 14/02/2009 - 10:41

I am not a lawyer but I cannot see how the SOA is legal since smaller foreign currency holders with less than £50K equivalent will receive LESS in the SOA than they would in the DSC. Surely this goes against every principle originally set up for the SOA and must be challenged in the courts