NFA Dead Forex Firms Walking

[forex scholar]

October Net Capital Report

October Net Capital Report

The U.S. retail forex industry appears to be soaring over the new capital requirements by leaps and bounds. October showed an across the board increase in virtually every dealer’s net capital. Still, for some firms it is a long way to $20 million. And while small firms like ACM and Advanced Markets were able to meet the first barrier the Scholar will be watching closely to see if they can keep it up.

Financial Data for FCMs

The following firms have net capital below $15 million

Advanced Markets $10,163,000
Hotspot $10,559,000
Easy Forex $10,891,000
ACM $11,855,000
GFS Forex $12,503,000
MB Trading $14,522,000

The following firms have net capital below $20 million

Ikon $15,033,000
Forex Club $16,489,000
Alpari $18,212,000
I Trade FX $18,411,000
ODL $19,991,000

The following firms have net capital above $20 million

PFG $21,809,000
CMS Forex $25,162,000
Interbank FX $40,892,000
FX Solutions $43,570,000
GFT Forex $76,980,000
Gain Capital $96,371,000
FXCM $122,924,000
Oanda $170,982,000

As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new $20 million capital requirement going into effect in the months ahead.

 

[wouste]

Hopefully, they will get their money back. But there are no guarantees if the firm becomes financially insolvent.

Mostly of the time they will lose the money right?

 

[forex scholar]

Mostly of the time they will lose the money right?

in the past that has certainly been the case

 

[RobinR]

Sadly, this is the case.

 

[elskid]

your choice?

what would be you "preferred list" of brokers

 

[richemarks]

Forex day trading system

In this forum the main thing is to trade in forex.And anyone can able to learn and earn in huge profits in sbm.Still many more facilities are available to gain profit from online..

 

[forex scholar]

NFA Drops another bombshell

The National Futures Association has passed some new rules that all traders should be aware of ASAP:

http://www.nfa.futures.org/news/PDF/CFTC/CR2_43_ForexPriceAdj_112408.pdf

A Forex Dealer Member may not cancel an executed customer order or adjust a customer account in a manner that would have the direct or indirect effect of changing the price of an executed order…

Translation- No more “adjustments,” unless these adjustments meet strict NFA standards.

Forex Dealer Members may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis.

Translation- no more hedging of the same position.

These are profound changes. How many times have traders complained about profits being “removed” from their accounts? Well, if you trade with a NFA registered firm those days appear to be over. The hedging prohibition may upset some traders but truth be told there is little logic behind holding the opposite positions in the same currency pair. Still, you would think traders would be allowed to trade as they see fit without the nanny state running around dictating what positions you are allowed to hold.

In any case the evolution of FX trading continues…

 

[SpecTrade]

That is very, very, very, very...interesting.
I would never thought they gonna make such rules.

I'm glad its happening, still, if a trader decides to hedge instead of executing SL, he should be allowed.
But overall, better this that completely unregulated hooligan-brokers, like it used to be.

 

[forex scholar]

But overall, better this that completely unregulated hooligan-brokers, like it used to be.

I like that, I'm going to use "Hooligan Brokers" in a different post

 

[amfx]

Regarding posts on CFG Trading.

As I understand it all the customers got their money back because the owner, Don Snellgrove, personally saw to it that they did and paid $8,000,000 out of his own pocket... Unfortunately it looks like Don was too trusting and was taken advantage of. There was never any questionable dealings in his past nor since.

 

[forex scholar]

Regarding posts on CFG Trading.

As I understand it all the customers got their money back because the owner, Don Snellgrove, personally saw to it that they did and paid $8,000,000 out of his own pocket... Unfortunately it looks like Don was too trusting and was taken advantage of. There was never any questionable dealings in his past nor since.

Don wasn't a fraudster. He just wasn't a very good businessman.

 

[richemarks]

Best forex trading system

The news about the nfa shaking up the forex industry by dramatically raising capital requirements has kicked off a lot of speculation. As someone who has been burned by a bankrupted forex broker I can tell you it is not a pleasant feeling to watch your funds get sucked into some black hole. So my advice is to stay away from any firm that is not currently meeting the coming $5 million capital requirement. And if you already have money at such a firm, get it out, now.

 

[chilltrader]

The news about the nfa shaking up the forex industry by dramatically raising capital requirements has kicked off a lot of speculation. As someone who has been burned by a bankrupted forex broker I can tell you it is not a pleasant feeling to watch your funds get sucked into some black hole. So my advice is to stay away from any firm that is not currently meeting the coming $5 million capital requirement. And if you already have money at such a firm, get it out, now.

Unless its regulated by the FSA in the UK.

I would stay away from ANY US based broker/fund etc in the current climate

The "regulation" out there is really cowboy'ish

How the fcuk people like Madoff get away with stuff is amazing... glad the credit crunch is bringing deep decay out in the open!!

 

[forex scholar]

Winds of Change Blowing in Switzerland

After years of fraud and malfeasance perpetrated by Bernie Madoff style Swiss forex brokers the retail forex business in Switzerland is on the verge of going legit as all Swiss brokers must either get a banking license or close up shop. However, these changes are still months away and thus many Swiss forex brokers continue to operate without a license.

But the good news is that the legit brokers are making themselves known. MIG Investments has just issued a press release stating that they have formally submitted their banking license application to the SFBC. This is no small feat and MIG should be congratulated on taking this first step:
MIG Investments SA - Press Releases

Other Swiss brokers are moving in the same direction as well. However, one broker may be hitting a road block; Crown Forex. A disturbing report over at Forex Peace Army indicates the broker appears to be having difficulties making good on customer withdrawal requests

Now it should be noted that Forex Peace Army isn’t exactly The London Times and thus this report comes with a pretty big grain of salt. Forex Factory has since dumped the thread into the recycling bin:

Extracted Post (promotion)

Crown Forex has been notified about this report and been given an opportunity to respond by Forex Factory and rest assured their response will be included on this thread once it is given. Also, Crown Forex has announced that they plan on having 15 million Francs on hand to meet the SFBC’s capital requirement according to this recent press release: Francesc’s Weblog Crown Forex increases its Share Capital

But the numerous instances detailed in the Peace Army report about Crown Forex not making good on customer withdrawals is very troubling and something traders should be aware of.

Again, the Scholar’s advice is to wait until these brokers actually gets their banking license before opening an account with any broker based in Switzerland.

 

[SpecTrade]

Yup. SFBC closed quite a few ones in Switzerland. I was with Neuimex at that time. I got my money back, though.

Merry Christmas and Happy New Year to Everybody!

 

[forex scholar]

Crown Forex in Crisis

It appears the Peace Army’s muck raking was well founded in regards to Crown Forex. Kudos to Pharoah for being ahead of the curve:

Extracted Post (promotion)

Swiss banking regulators have launched an investigation of Crown Forex and appointed several care takers to administer the firm’s last rites. Here is the official announcement from the SFBC (rough translation from Google):

https://www.shab.ch/shabforms/COMMO...=2&page=/COMMON/search/searchresultDetail.jsp

The Federal Banking Commission has appointed Laurent Winkelmann, of Geneva, Chêne-Bougeries and Philippe von Bredow, Lausanne, in Celigny responsible investigation Crown Forex SA. Laurent Windelmann and Philippe von Bredow are authorized to bind the Crown Forex SA by individual signature. It is forbidden for bodies Crown Forex SA to carry out any legal act without the agreement of the responsible investigation.

For breaking news on the investigation of Crown Forex check this thread here which recently posted an alleged letter from the SFBC regarding their investigation of Crown Forex:

Crown Forex anyone?

Dear (name omitted)

In response to our e-mail dated 16 December 2008, we would like to present to you the following information:

As already informed, the Crown Forex SA, Bassecourt has no authorization by the Swiss Federal Banking Commission (SFBC) for an activity in the financial sector in Switzerland.

To clarify the existence of the authorization requirements, in cases of suspected law violations or suspected pursuit of activities without proper authorization and in danger of insolvency, the SFBC investigators have to clarify the facts to use.

For the SFBC, acting in such cases, a superprovisional decision is available for use of an investigation officer. These investigators are charged with the investigation of the business activities of the company and are to report to the SFBC. The investigation officers are equipped with all necessary power and as such they appear in the commercial registry. They can act now on behalf of the firm. That is the case for the Crown Forex AG with superprovisional order as of 9 December 2008 (published in the Gazette on 18.12.2008) were Mr. Laurent Winkelmann, Chêne-Bougeries and Mr Philippe of Bredow, Célignym, investigators to the Crown Forex SA, were appointed.

On the basis of the report of the investigation officers the SFBC will make a decision and, where appropriate, publish it on its website. At the moment we can offer no further details. You or your contacts in the U.S. are invited to contact us again at a later stage.

Yours sincerely

Secretariat
SWISS FED. BANKING COMMISSION

I’ve said it before and I’ll say it again. DO NOT TRADE with a Swiss forex broker UNTIL they get a banking license. There are plenty of decent brokers that are regulated all around the world from Australia to the UK to the U.S. Crown Forex is just the latest example of what can happen when you trade with an unregulated broker.

 

[forex scholar]

Crown Forex Update

Just received this update from someone who has been involved in the controversy at Crown Forex. This would explain the withdrawal difficulties customers have been experiencing.

The skinny at Crown. Wanted to let everyone know what's really going on with Crown. First of all the people who were having problems withdrawing were carry traders who were not paying any interest with Crown. Crown realized some of these guys were holding GBP/JPY long term and not paying the normal fee for doing so. As a result they froze the accounts and tried to retroactively charge the clients a fee. The clients were not willing to pay it and complained to the Swiss authorites. I was able to negotitate the return of all my client's money so that he would not pay any fees. He was the biggest carry trader over there and one of the guys on FPA. Well they started to pay him but the investigation he helped get launched now will prevent him or anyone else from getting any money out of Crown at all intll the investigation finishes. So it's a lose lose for everyone involved.

Scott Kuehne
FX Traders Inc.

Developing...

 

[forex scholar]

The Forex Scholar Seal of Approval

In light of the government takeover of Crown Forex I am once again being asked, “which specific broker do you recommend?” That is not for the Scholar to say. Different brokers have different products and all traders should conduct a regulatory background check and thoroughly demo test a broker’s platform before opening a live trading account.

That said there are many solid brokers in the market place who are regulated and unlikely to go under anytime soon. Here is the Scholar’s list of approved brokers:

U.S. Based Brokers

1. Oanda
2. FXCM
3. Gain Capital
4. GFT Forex
5. FX Solutions
6. Interbank FX
7. CMS Forex

European Based Brokers

1. Saxo Bank
2. IG Index
3. CMC Markets
4. MF Global
5. City Index

Banks

1. DBFX
2. CitiFX

I have omitted smaller based U.S. brokers who have yet to meet the $20 million capital threshold, Swiss brokers who have yet to get a banking license and any offshore broker hiding out in shady jurisdictions such as Cyprus or Belize.

Of course, any of the brokers on the Scholar’s list of “approved” brokers could run into trouble in the future. If Lehman Brothers and Bear Stearns can vanish overnight no financial institution is immune from insolvency. Already, I have reported on the financial troubles of both Saxo Bank and CMC markets in the last few months. But even taking into consideration the mass layoffs at both firms neither is likely to go belly up and take customer deposits with them.

In addition most of the U.S. based brokers on my list have had various regulatory actions taken against them (none of them however were charged with any financial violations and were related to marketing practices, which doesn’t interest me.)

I’m sure there are readers thinking to themselves, “that broker on your list is a crook and a cheat so how can you approve them?!” Simple, because those who feel one of these brokers has cheated them always has the option of filing a complaint with the appropriate regulator and have your day in court. But if you are trading with an unlicensed broker you’ll be lucky to even get a customer service agent on the phone to complain to in the first place let alone actually have an arbiter hear your case.

In short, I would feel comfortable opening an account with any of these brokers. Hence the reason they have been given “The Forex Scholar Seal of Approval.”

 

[forex scholar]

ACM Throws in the Towel

ACM is officially closing their U.S. office and retreating back to Switzerland after failing to make any headway in the U.S. Of course the Scholar has long suspected this Swiss broker wouldn’t last very long on this side of the pond in light of the increased capital requirements. Furthermore, I was right on the money in stating they clearly didn’t due their homework before opening an office here. The company was a registered NFA member for less than 12 months. What a wretched waste of money, time and man hours to set up an overseas office and then close it down in less than a year. This is not the sign of a company with a master plan. If they were publically traded I’d be shorting them with the intensity of a day trader dealing in shares of General Motors. Here is the official statement from ACM which you can find on the front page of their website: Forex - Currency Trading - Forex Broker - ACM (USA) LLC

ACM USA's white-label licensor, ACM – Advanced Currency Markets SA (“AC-Markets”), announces another milestone in its already impressive and successful history: the formation and creation of ACM Bank. The ACM Group proudly announces the planned reorganization of the ACM Family under the new ACM Bank.

In an effort to ensure greater security, safety, and enhanced banking and investment services to their clients, ACM Group is in the process of applying for its Swiss banking license.

As a result, for the short term ACM USA will no longer be an active NFA member. This means that ACM USA will no longer act as a counterparty to forex positions and will not continue to service client accounts. Instead, ACM USA will remain a licensed office to AC-Markets assisting in the opening of forex trading accounts directly with AC-Markets and in the future with ACM Bank. AC-Markets is not a National Futures Association (“NFA”) member firm and cannot accept U.S. customers until the approval of its Banking license.

Please note the coming date which is of importance to your ACM USA forex trading account.
• On January 8, 2009 at 9:00 a.m. EST, all open forex positions and accounts will be closed at the prevailing market price.

You may continue to trade or close your ACM USA account until the above mentioned date. However, should you not take any action before the above mentioned date, your account will be closed and the account balance will be returned to you by check.

I love how these brokers close up shop and give their customers barely any notice before their positions are forcibly liquidated. One day you are trading with a long term strategy waiting for a position to retrace and the next your broker sticks a fork in your positions and blows up your account. And ACM celebrates this as a “Milestone,” (to be ranked right up there with the invasion of Normandy and the first man landing on the moon perhaps.) This is why it is so important for traders to make sure their broker is around for the long haul. And as the record shows, Swiss brokers are anything but safe long term bets.

We’ll be waiting to see if you get that bank license guys but as of now ACM is an unregulated Swiss broker and should be avoided until they once again submit themselves to real regulation.

 

[forex scholar]

Former Dead Pool Dealer Indicted

One of the very first forex dealers that the Scholar shined his light on was One World Capital. Here is an excerpt from the summer of 2007: Forex Forum - FXstreet.com - View Single Post - NFA Forex Dealer Dead Pool

As I continue to update the dead forex firms walking list I'm amazed how many people think fraud and undercapitalization are completely separate issues. Often times they are not. The reason is quite simple: firms that are committing fraud are not known for having legible books. And Vice versa. Firms that have a hard time maintaining their capital requirements will often cut corners and commit fraud to keep their firms from going under. Finally, smaller firms simply don't have the money to maintain the kind of large legal and compliance staffs necessary to keep up with the battery of regulations being issued by the NFA and CFTC. And of course some firms are just plain incompetent. All these factors have come to a head with Forex Dealer Dead Pool Member One World Capital, who is now in serious trouble with regulators.

To see the full report on One World's misdeeds you can click on the NFA's report yourself: http://www.nfa.futures.org/BasicNet/...px?seqnum=1190

In short, One World is a classic Dead Forex Firm walking. Firms like One World are the reason the NFA is going to raise capital requirements. And when they do, does anyone honestly believe the One World's of the world will survive?

Over the next several months One World rapidly circled the Bowl:
Forex Forum - FXstreet.com - View Single Post - NFA Forex Dealer Dead Pool

The word on the street is that the situation at One World has become so dire that a large chunk of their sales force resigned because they hadn’t been paid for two months. Other traders are reporting non-responsive customer service, emails that go unanswered and phones that keep on ringing. All the signs of a firm in its last death throes…

The bottom line is when you can’t return a customer’s money when they ask for it you are finished in this business. One World may be able to limp on indefinitely but it is hard to see this firm making a comeback to respectability. Barring a fat sugar daddy willing to pump in ten million dollars this firm’s days appear to be numbered.

Forex Forum - FXstreet.com - View Single Post - NFA Forex Dealer Dead Pool

And the hits just keep on coming for One World Capital. The NFA just announced that One World has been fined $100,000 for the complaint brought against them last spring.
http://www.nfa.futures.org/basicnet/...17&contrib=NFA

In any case, I strongly recommend ANYONE who has an account with One World for the love of criminy get your money out of that firm once and for all- if you even still can…

Finally, like that fat man in the Monty Python sketch who exploded upon eating a mint One World’s bloated and rotting gut burst into a million pieces in December of 2007 when regulators shut the firm down for good:
Forex Forum - FXstreet.com - View Single Post - NFA Forex Dealer Dead Pool

Now the Feds have swooped in and arrested John Walsh and friends. Leading the charge is Patrick Fitzgerald. Fitz can mount Walsh’s head above the fireplace, right next to former kills like Scooter Libby and Governor Blago. Welcome to the party pal: Feds arrest 2 Winnetka futures dealers on fraud charges -- chicagotribune.com

Feds arrest 2 Winnetka futures dealers on fraud charges
By James P. Miller
Tribune reporter
4:27 PM CST, January 7, 2009
Federal agents arrested two top executives of a Winnetka foreign-exchange futures dealer that collapsed over a year ago on federal fraud charges, the Justice Department disclosed Wednesday.

Both men were principals with One World Capital Group, which was effectively shut down in December of 2007 when the Commodity Futures Trading Commission – responding to a growing chorus of complaints from customers who said they'd been unable to withdraw funds from their accounts -- obtained a court order that froze One World's assets and barred the troubled foreign-currency trader from further trading activity.

Wednesday's actions, including agents' execution of "search and seizure" warrants at both officials' homes, represent the first criminal charges to emerge from the company's failure.

FBI agents arrested One World founder John E. Walsh at his Lake Forest home this morning, U.S. Attorney Patrick Fitzgerald's office said in a Wednesday statement.

Another One World principal, 43-year-old Charles G. Martin, of Glencoe, was arrested last night in the Los Angeles area. The government calls Martin a "de facto" official of the currency-trading concern, although he was prohibited from holding a position with the company.

A criminal complaint unsealed this morning charges both men with one count of wire fraud each, for improperly diverting to their own use customer funds that were supposed to be invested in foreign-currency trades.

The two men used customer funds they had misappropriated "to finance a lavish and extravagant lifestyle," racking up huge sums on corporate credit cards largely paid for by the company, the government's criminal complaint says.

Martin charged over $1 million "at a strip club and restaurants" over the course of 20 months, the government says, spent $50,000 at toy stores, and used his company credit card to finance $280,000 in jewelry-store purchases.

In addition, the complaint says that Martin and Walsh used hundreds of thousands of dollars they had diverted from One World to finance a never-released movie entitled "Order of Redemption."

The company, founded in 2006, hit turbulence in the spring of 2007, the government notes, when the National Futures Association found improprieties in the course of an audit.

The fallout from that audit sparked a rise in the number of customers who sought the return of money they had invested, the complaint notes, but the firm couldn't honor those requests because the two men had allegedly been dipping into margin funds as part of their misappropriation scheme.

Based on the company's refusal to honor those customer redemption requests, the federal regulatory agency known as the Commodity Futures Trading Commission filed a civil complaint against One World and Walsh in Chicago federal court in mid-December, 2007. That litigation led to the asset freeze that has been in place for the past year.

Chicago attorney Kevin Flynn, who is representing Walsh in the One World matter, said he hasn't had a chance to review the government's criminal complaint, but said "I don't believe that Mr. Walsh will admit guilt of any criminal conduct."

Indeed, said Flynn, Walsh has been cooperating with the CFTC's One World probe, and had this week reached an agreement in principle, in the courtroom of the judge hearing the civil case, on a possible resolution of the CFTC's complaint.

"We were shocked and surprised at the timing" of the government's decision to bring criminal charges, said Flynn, "coming as it does on the heels" of the tentative resolution of the civil complaint.

Martin, who was to appear Wednesday in Los Angeles federal court, couldn't immediately be reached for comment.