German law enforcement has conducted a series of raids and arrests of alleged participants in fraudulent investment companies and brokers. According to a notice from the Bamberg Prosecutor General’s Office and the Police Headquarters in Schwaben, Germany some 18 people were arrested.
The authorities apparently also conducted searches at 17 different properties and 7 call centers in an effort to bring alleged scammers to justice. The individuals and their firms allegedly scammed European investors by offering fake investment platforms through companies and websites such as FXCMarkets, FXOptexGroup, Swissinv24, CFXPoint, IForex24, CodexFX, HBCMarket, CapitalGFX, Investment Department, Tradingmarkets24, and Brokermasters.
German authorities indicated they intend to prosecute those arrested: “as things stand, the Central Office Cybercrime Bayern will ask for the extradition of at least six of the arrested men. The detainees come from the Republic of Kosovo, Albania, and Germany. The detainees are, on the one hand, call center employees, who were particularly ‘successful’ with German-speaking victims and are said to be responsible as ‘top brokers’ for damages in the millions, and on the other hand, the leaders of the call centers.”
Investors and traders should always check their broker before transferring any funds or opening an account to avoid becoming a victim of such fraudulent schemes.
The international brokerage CMC Markets has announced to its Australian clients that it will no longer offer Countdown trading on its platform ahead of the ban on binary options trading by the Australian Securities and Investments Commission (ASIC) that is coming into effect on May 3, 2021.
The broker indicated that such trading products will be halted at 5 pm AEST 30 April 2021 on its website. Countdown trading allows traders to speculate on whether the price of an instrument goes up or down in a specified time. Once a Countdown is opened, the stake is immediately payable, and a corresponding deduction will be made to the cash in the relevant account.
A Countdown will be closed and settled by the platform automatically once the Countdown expires. These instruments usually have a time frame of just 30 seconds and offer a payout of up to 90 percent. One can argue that such trading instruments are very similar to binary options and indeed, the same instruments are regulated in Britain as licensed gambling products.
The Cyprus Securities and Exchange Commission (CySEC) has published a review of its Cyprus Investment Firms (CIF) and identified a number of deficiencies, as well as good practices among brokers it regulates.
The regulator noted that most deficiencies are in risk assessment, monitoring activities and compliance and indicated that “the management board should convene regular meetings where the compliance function can properly present material deviations or situations requiring urgent resolution in order to rectify any urgent compliance matters and the compliance function should properly record such meetings.”
Further issues include reporting obligations and the fact that some CIFs only focus their annual compliance reports on “findings from the evaluation of the Regulated Entities’ written policies and procedures.” In addition, firms are apparently lacking in advisory obligations by not providing “enough evidence or details of regular internal and external training is provided such as records of training logs.”
Good practices were identified in areas of minutes of quarterly meetings with compliance officers and management, as well as preparation of quarterly reports.
CySEC included a set of next steps and advised regulated brokers to “consider the issues raised in this circular against their policies and arrangements in place in relation to the compliance with the compliance function requirements. If, when reviewing the policies and arrangements in place, Regulated Entities identify any weaknesses – they must take immediate actions to ensure compliance.”
The Australian Securities and Investments Commission (ASIC) announced last week that binary options trading in Australia will be banned starting on the 3rd of May 2021. The regulator indicated that its review of the binary options market in 2017 and 2019 showed that approximately 80% of traders lost money in binary options.
The regulator pointed out specific characteristics of binary options trading that may result in cumulative losses for clients, including:
ASIC estimates that Australian traders have lost an estimated $490M in 2018, while a previous formal warning from the regulator in 2019 looks to have curtailed trader losses to only $6.7M in 2019. The ban on binary options is set to last 18 months, but it is likely to be extended or become permanent following further review by the Australian regulatory authorities.
The U.S. Attorney’s Office for the Eastern District of New York yesterday announced the guilty plea of New York resident Tae Hung Kang, also known as “Kevin Kang,” in the securities fraud case related to a scheme involving foreign exchange trading that targeted members of the Korean-American community.
The authorities indicated that Mr. Kang pleaded guilty and “faces up to five years in prison, as well as forfeiture and a fine. Kang has also agreed to pay restitution in the amount of $835,058.32.” The fraudulent scheme operated under the brand name FOREXNPOWER, while Mr. Kang “defrauded investors located in the Eastern District of New York and elsewhere in connection with foreign exchange trading which refers to trading one currency for another in an effort to profit from fluctuating exchange rates. Kang enticed investors to invest their money into stock issued by his company, Safety Capital Management, Inc. (“Safety Capital”).”
Mr. Kang used some of the money stolen from clients to pay for advertisements targeting additional investors and promoting FOREXNPOWER’s outsized trading returns based on an algorithmic trading method that did not actually exist.
We advise all traders and investors to Check Their Broker and if you have doubts, to check the registration and license of a brokerage using our financial regulator search tool.
Police in India have reported that they have nabbed two suspects of an alleged Forex scam approximately worth up to $1.7M. Victims reported that they were contacted by unknown individuals and lured investors to “Deltin International Foreign Exchange in order to earn high profits.”
The investigation and subsequent arrests were the results of a formal complaint with the office of the Commissioner of Police, filed by a victim of the scam. Deltin International Solutions (www.deltinfx.com and www.deltininternationalsolutions.com) was the entity allegedly used to scam more than 100 people into so-called “foreign exchange trades”.
Authorities say the company and the alleged scammers operated for at least a year and a half before the possible fraudulent activity was uncovered. In addition, the scam took “advantage of the situation during the lockdown, they lured many to invest into their companies on the pretext of fetching high returns on their investments.”
The Cyprus Security and Exchange Commission (CySEC) has issued a new warning against unregistered firms operating under the guise of having a Cyprus Investment Firm (CIF) license.
The websites in question are listed below:
Investors are always advised to Check their broker before opening an account or investing funds and can find a list of international regulators to confirm the licensing and authorization of brokers around the world on our website.
The US Securities and Exchange Commission (SEC) has sued a Bahamian-based brokerage for illegally operating in the United States, according to a notice from March 22, 2021. The company MintBroker International Ltd., operating as SureTrader and headed by co-defendant Guy Gentile allegedly “operated an offshore broker-dealer that marketed its ability to help novice day traders in the United States circumvent U.S. rules that regulate “pattern day trading.” A pattern day trader is any margin customer that day trades four or more times in five business days, provided the number of day trades is more than six percent of the customer’s total trading activity for that same period.”
The regulator further alleges “that SureTrader, through its website, by email, and by means of advertisements on popular U.S.-based day trading websites, solicited thousands of U.S.-based customers to open accounts with and trade through SureTrader. The SEC further alleges that, although it was not registered with the SEC as a broker-dealer during this period, SureTrader nevertheless engaged in ongoing securities relationships with U.S. customers, including by holding funds and executing transactions on their behalf. According to the complaint, as a result of their efforts, SureTrader and Gentile received millions of dollars in transaction-based compensation.”
The lawsuit will be heard in the southern district of Florida and it remains to be seen what arguments the company can bring to its defense. The Bahamas has become a regulated jurisdiction for brokers as of late, although it remains on the list of risky jurisdictions for US regulators, including those tasked with determining the risks of transacting with firms outside of the United States.
Italy’s financial regulator – the Commissione Nazionale per le Società e la Borsa (CONSOB) has continued its efforts to protect its citizens from unregulated financial companies and possible online scams. The regulator announced on Friday that it has blocked five more websites of such firms and is advising all traders to take notice.
Below are the websites Consob has ordered to be blacked out:
– Salvax Limited (websites www.fxsuit.it and www.fxsuit.net);
– NewTraders Holdings Ltd (website https://eu-markets.co and related page https://client.eu-markets.co);
– Triton Partnership Ltd (website https://lcoinmarket.com and related page https://client.lcoinmarket.com);
– Evolution Markets LTD (website http://marketseco.com).
The number of websites blacked out since July 2019, when Consob got the power to order that the websites of fraudulent financial intermediaries be blacked out, has thus risen to 405.
Consob draws investors’ attention to the importance of adopting the greatest diligence in order to make informed investment choices, adopting common sense behaviors, essential to safeguard their savings: these include, for websites that offer financial services, checking in advance that the operator with whom they are investing is authorized, and, for offers of financial products, that a prospectus has been published.
Administrators for failed UK brokerage SVS Securities have notified the public that compensation roll-out or payments may finally be coming this year. According to Finance Magnates, the administrator, Leonard Curtis, has scheduled a hearing to approve milestones in the administration process that may finally yield compensation payments to former clients of the troubled brokerage firm.
The administrator concluded that if the milestones are met, customers can expect to receive funds per the Financial Services Compensation Scheme (FSCS) after April 31, 2021, and the process would conclude by July 29 of this year.
The administrator also noted that although the deadline to submit claims has expired, customers should still submit claims as soon as possible to try and recover funds on a pro-rata basis. The process of administering compensation, in this case, has dragged on for several years as the brokerage was put into special administration way back in August of 2018.
Italy’s financial regulator – the Commissione Nazionale per le Società e la Borsa (CONSOB) has continued its efforts to protect its citizens from unregulated financial companies and possible online scams. The regulator announced on Friday that it has blocked several more websites of such firms and is advising all traders to take notice.
The new firms are blocked via the so-called “Growth Decree”, on the basis of which Consob can order Internet connectivity service providers to inhibit access from Italy to the websites through which financial services are offered without due authorization.
Below are the websites Consob has ordered to be blacked out:
– KBS Capital Markets Ltd (website https://royaltradefx.com and related page https://my.royaltradefx.com);
– Donnybrook Consulting Ltd (website www.eurofx.trade);
– Investigram Ltd (website www.investigram.com);
– FCS Technology Ltd (website https://stockmarketinvest.pro and related page https://client.stockmarketinvest.pro).
With the addition of these websites, the regulator has indicated that the total number of firms and websites that have been affected this way in Italy is now a total of 400.
The US National Futures Association (NFA) yesterday warned market participants and registered entities in an email notice of a campaign involving fraudulent emails being sent purportedly from NFA staff. The regulator indicated that unknown parties are imitating specific NFA staff in order to send an attachment in the email communications.
The NFA indicated that phishing emails have been sent purportedly from staff, including Valerie O’Malley (see Sample Phishing Email below), Regina Thoele and Jennifer Sunu. The regulator said “other staff member names may be used as well. These emails have a source domain name “@nfa-futures.org” and request an immediate response. They also may include an attachment.
The regulator reminded that all legitimate communications from the association are sent from addresses ending with @nfa.futures.org, [email protected] or @nfa-swaps-proficiency-requirements.moonami.com in the case of NFA’s Swaps Proficiency Requirements. In addition, the NFA recommended that “in general, Members should not trust unsolicited emails, especially emails that ask for personal or financial information. With any email, Members should verify the sender prior to responding to it and ensure the validity of links or attachments prior to clicking on them.”
AxiCorp, a multi-regulated financial broker operating under the Axi brand has announced today via press release that the Australian Securities and Investments Commission (ASIC) decided to withdraw the proposed suspension of Axi’s Australian Financial Services License (AFSL) last month.
The broker indicated that “the suspension was never put into effect and Axi have been able to provide uninterrupted service to our valued ASIC entity clients throughout the process.” Both parties have agreed to “license conditions” without going into specifics, but the broker stressed that it “takes all risk and compliance matters extremely seriously and has made a significant investment in its Australian compliance function and practices to ensure it is appropriate to meet our obligations with reference to the size and complexity of the business.”
Rajesh Yohannan, CEO of AxiCorp said “I am pleased we’ve been able to work with ASIC to come to a settlement which we believe is a fair response to ASIC’s concerns. I’m also very proud of the ownership and commitment from the senior leadership team and the level of all employee engagement in strengthening our compliance culture at Axi.”
So-called penny stocks have recently attracted the attention of not only retail traders but also regulators. The unhealthy hype created by hobbyist investors around these securities on social media has put many brokers in a tough spot.
In this course, IG Group has imposed limits on margin trading in small-cap stocks. The sanctions hit 900 securities, including the shares of the insurance company Hiscox, the operator of shopping centres Hammerson and the clothing brand Superdry. In general, the restriction will affect less than 8% of all instruments available for margin trading on the IG Group platform.
“Our interests are aligned with that of our clients, we operate a hedged business model, externally hedging risk where appropriate. We want our clients to trade well and successfully. Where a client experiences problems we will support them through this” said the IG Group spokesperson.
“IG does not close out positions in the way described” continued the IG Group spokesperson. “In keeping with ESMA and FCA rules, positions for retail clients are automatically closed out when the equity on the account falls to 50% of the required margin. This would also apply to pro clients unless they have made an express alternative arrangement with IG. It is difficult to comment further without knowing the individual circumstances and arrangements in place for this client.”
It should be noted that the broker’s clients still have the opportunity to trade the shares of these companies, but without using leverage. This means they have to pay the entire purchase price themselves.
As a regulated broker, IG is required to comply with a host of requirements, including the requirements for maintaining net capital and clearing deposits. Some of them change depending on the degree of market volatility.
The United Kingdom’s Financial Services Compensation Scheme (FSCS) has issued a public notice that it has compensated victims of London Capital & Finance plc (LCF), which failed and went into administration in January 2019.
The UK financial services compensation fund acknowledged that it had “now paid out just over £56.3m in compensation to 2,878 LCF bondholders who held 3,815 LCF bonds.” The FSCS has added that they are “close to having identified and paid all LCF customers who we believe are eligible for FSCS compensation. We appreciate that LCF customers have been waiting patiently while we continue to review claims on a case by case basis. It has taken longer than we anticipated, as we have continued to identify and analyse more evidence which could result in us protecting more customers. We remain committed to ensuring that each piece of evidence and each claim gets the attention it deserves.”
As reported by FinanceMagnates, the collapse of LCF affected some 12,000 investors for a total estimated loss of £236 million. As such, the compensation awarded to investors by the FSCS is only a fraction of the total losses, but nonetheless provides some remediation in this particular case.