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Rock Financial Services





The lifespan of Rock Financial Services launched in 1998 was brief, dramatic and spectacular before it was put into liquidation by the Supreme Court of Gibraltar in the summer of 2003 with PricewaterhouseCoopers appointed as Joint Liquidators.

The Gibraltar Financial Services Commissioner ordered: ‘the directors of Rock Financial are required to transfer to the custody of PricewaterhouseCoopers … all property and assets in the form of cash and investments which belong to the firm; or are held by or to the order of the firm, and either belong to investors, or relate to the investment business of the firm unless such property is being transferred or returned.’

When the dust settled Rock FS appeared to boast little or no assets with creditors claiming up to $15 million. Then 540 bearer shares in Perun Holding AG of Zug, Switzerland manifested themselves into the equation introduced magnanimously by one Michel Eidi who arranged for their return to Gibraltar and the shares now reside in escrow (in the custody of Mr. Fabian Picardo of Hassans law firm) under an arrangement benefiting the Eidi Parties. Mr. Picardo represents Michel Eidi and his Associates - the Eidi Parties. Mr. Eidi wanted clarification of the ownership of the Perun shares, which he claims were pledged to him and his Associates as the Rock ship sank ignominiously and gracelessly into liquidation. Was such a pledge in all the circumstances a fraudulent preference? There are various claims on the Perun shares not least by Rock’s creditors.

The relevance of these shares to the Rock liquidation is that they appear to be a metamorphosis of $4 million of Rock’s clients’ money in that Rock’s clients’ funds drawn from Cayman Island Rock Funds provided the purchase money for them. It is claimed that they are worth considerably more now with substantial dividends accumulating.

On 14th June 2006 at a meeting of the Committee of Inspection PwC as Joint Liquidators agreed on behalf of Rock’s creditors to disclaim any interest in the Perun shares in return for a stake in their future dividends. Mystifyingly PwC renounced an asset without knowing its true value. It is argued that PwC breached its authority and terms of reference in making this agreement without the sanction or approval of Rock’s creditors in their entirety. Indeed the agreement was made between the Joint Liquidators and the Eidi Associates. In simple terms although the Joint Liquidators might argue that they had a right to do it, their decision raises serious questions about their judgment in prejudicing the interests of the creditors who number some 400 claiming up to $15 million.

Advocates of this agreement claim that a proposed endowment of a minority share of the Perun dividends in their favour by the Eidi Parties is the best settlement the Rock creditors are likely to receive. It is being presented to the creditors as a fait accompli Hobson’s choice. The Eidi Parties take the lion’s share of future dividends on an extremely dubious premise.


Under the terms of the Disclaimer Agreement dated 28th June 2006 the Eidi Parties agreed to ‘‘forego all and any of their respective claims in the liquidation of RFS, in favour of the Joint Liquidators…In the event that Joint Liquidators were to recover sufficient assets in the liquidation of RFS to pay a minimum of US$7,500,000 (seven Million five hundred thousand US dollars) to the creditors of RFS and all the costs of the Liquidation (“the Liquidation Costs”), following distribution of the US$7,500,000 and the Liquidation Costs, the Creditors’ claims in the liquidation of RFS shall be reinstated and rank pari pasu with the remaining creditors of RFS’’.


On this basis have not the Eidi Parties effectively rendered their position on the Committee of Inspection untenable and incompatible by waiving their claim in the liquidation? It would appear opportune now for the creditors of Rock to be represented fairly, impartially and transparently in numeral or monetary terms on the Committee of Inspection.


Mr. Picardo had advised the joint liquidators who later appointed Mr. Nick Cruz as a lawyer to advise them which he duly did. Mr. Cruz advised the liquidators of the advantages of entering into the disclaimer agreement without actually spelling out what those advantages were as in ‘swallow this it will do you good’. Remember that Mr. Picardo is lawyer to the Eidi Associates so hardly sitting on the fence and the interests of the joint liquidators and the Eidi parties are not necessarily homogeneous.

Swiss legal opinion on rights and entitlement to the Perun shares has been sought, but this erudite opinion has not entered the public domain. Not even the Committee of Inspection has been acquainted with it.

Around $4million was paid for the Perun shares from Rock’s clients’funds, so it is a reasonable and logical argument that when the money in Rock’s coffers, regardless of which of the labyrinthine network of companies actually paid over the money, is converted into Perun shares that the creditors of Rock can justify a claim to those shares.

In April 2003 as Rock circled the wagons there came into existence a loan note for $500,000 purporting to evidence a loan in that sum by Michel Eidi to Rock. At about the same time a similar loan note for $5 million appeared ostensibly evidencing a loan in that sum by Eidi & Associates to Rock. Perun shares are not mentioned in these loan notes. Rock appears never to have received the $5 million as such, but allegedly $500,000 was received from a client of Michel Eidi and paid into the trading account of that client where it might have been dissipated through trading losses.

At about the same time the 540 Perun shares passed into the possession of an American attorney named William Seikaly. Mr. Seikaly removed the Perun shares from Gibraltar under a questionable claim on behalf of Mr. Eidi and the Eidi Associates. Mr. Eidi subsequently brought the shares back again to Gibraltar and it is claimed on his behalf that he did not have to do so. It is said that Mr. Seikaly ‘blew the whistle’ on Rock for breach of its licences from the Gibraltar FSC. Is it not curious then that an attorney should remove such a valuable and contentious commodity from the jurisdiction of Gibraltar? Once removed what was Michel Eidi’s motivation or reason for bringing the shares back to Gibraltar?

Rock FS is still being investigated by the Gibraltar police so should not the Perun shares be held by the Gibraltar police? In anybody’s language Rock was steeped in fraud and one must look with great suspicion at any transactions perpetrated in its dying days by those responsible for Rock that financially benefited certain parties to the financial detriment of other parties especially Rock’s creditors.

There appears to be a disadvantaging lack of transparency and disclosure in the facts and evidence as presented and made available to the liquidators and the Committee of Inspection who are having to make decisions without having all the facts in front of them or without being given the benefit of full and unfettered legal advice not tainted by vested or self-interest.

The creditors of Rock Financial Services should make their opinions and arguments heard by lobbying the Joint Liquidators and the Committee of Inspection to press their claim to the Perun Holding AG shares for the benefit of the creditors as a whole and not a favoured minority.


Relevant parties are:


Mr. Edgar Lavarello, Joint Liquidator, PwC Gibraltar:


Mr. Nick Cruz, Cruz & Co:


Mr. Marcus Killick, Commissioner: Gibraltar Financial Services Commission:


Mr. Fabian Picardo:


 Gwilym Rhys-Jones

Adviser and Investigator

Costa del Sol Action Group

E-mail: gwilymr-js"MsoNormal" style="MARGIN: 0cm 0cm 0pt">Tel: +(34 951 31 82 77

Mobile: +(34) 699 840 606

Skype address: gwilymrj



Collapse of Rock hits expats

By Jon Boone

Published: July 23 2004 18:10 | Last Updated: July 23 2004 18:10


Gibraltar gave the English language the phrase "as safe as the Rock", such was the impregnability of the fortress base for the Royal Navy. But the same cannot be said about Rock Financial Services, an execution-only brokerage company based in Gibraltar that collapsed last year losing £12m and leaving hundreds of small investors out of pocket.


The downfall of Rock risks seriously tarnishing the reputation of the territory, which has been seen as one of the better places for investors to manage their money offshore.


Leonard Berney, a British financial adviser based in Spain who has many clients who lost money in the demise of Rock, described the collapse as scandalous and said it could badly damage the territory. "The figure lost is a lot of money in anyone's language," he says. "It is a catastrophe for little Gibraltar and could scupper the territory as a financial centre."


The collapse of the company hit about 400 investors, many of them expatriates living in southern Spain who are attracted to Gibraltar by its geographic convenience, English-speaking advisers and regulatory requirements that broadly match UK standards.


One of them, a former civil servant who retired to Spain with his wife, lost almost £20,000 and says he now has no money left for investments.


The man, who did not want to be named, said: "The company simply never bought the stocks I had instructed them to buy. I never found out until I tried to move some money out of their client account. They were really evasive at first until they eventually admitted that they had gone into liquidation."


It is unlikely that this customer will see any of the money again since Gibraltar's investors' compensation scheme was only set up after the collapse of the company, which, according to an investigation by PwC, did not have adequate capital and had failed to properly safeguard customer assets.


In June last year the Royal Gibraltar Police raided the company's office and the company was wound up soon afterwards. The investigation into the £12m shortfall is continuing.


Whatever the outcome, everyone connected with the Gibraltar financial services industry, which controls about £1bn worth of assets and is the third-largest part of the territory's economy, was shocked by Rock's collapse.


The debacle is also embarrassing for the territory, which operates in a highly competitive market dominated by offshore financial centres such as the Isle of Man and the Channel Islands.


The various centres compete for business on the quality of service offered, the speed with which they respond to clients, and their regulatory reputation.


Gibraltar's Financial Services Commission guards its reputation zealously, even to the extent of taking action against companies that falsely claim to be based in the territory.


Marcus Killick, chairman of the Gibraltar's Financial Services Commission, says the collapse of Rock was an extremely unusual event and should not be seen as symptomatic.


"Gibraltar has been independently verified as having sound regulatory structures but . . . we can't prevent crime from happening. We acted the moment we heard about the issue and the matter is now being dealt with by the police," he says.


Investors in Rock, however, are far from satisfied that enough was done to prevent the company from collapsing. Andrew Linn, a Briton who retired to Spain, says the problems should have been picked up far sooner by the FSC.


"It is clear that there was something going on in the period of the previous audit before the company was closed down. They should have seen that it was trading illegally and done something about it," he says. Bill Blevins, managing director of Blevins Franks, a company specialising in expatriate fund planning, says he received emails from investors worried about the company 18 months before the FSC acted.


However, he said the regulator had been working hard to sharpen up its performance. "I can guarantee that there will someone down in Gibraltar saying: 'Why the hell did we not do this more quickly? We were beginning to straighten up and this bloody thing happens'."


Either way, it seems, restoring the territory's reputation for rock-like security will take some time. As Blevins put it: "Gibraltar needs this like a hole in the head."







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