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Proposed NFA Capital Requirement
- Thread starter forexsavior
- Start date
Scandal at Forex Liquidity
Of all the scandals I have reported on to date this one is by far the most disturbing. The main reason is because FXLQ appears to have defrauded, not just the trading public, but more importantly U.S. regulators. And did it in such a bold manner as to send chills down the spines of anyone concerned about due diligence.
Yesterday the NFA took a member responsibility action against Forex Liquidity that prevents them from accepting any new customers, distributing customer funds without their approval, and requires that FXLQ provide NFA with a full accounting of their financials, which they have been unwilling to do as of this date:
http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0362216&case=07MRA00013&contrib=NFA
Why has the NFA taken this action? Let's go right to the source, the NFA auditor's own affidavit:
Ah yes, FXLQ reported adjusted net capital of $36 million on their last CFTC report. These guys have been telling regulators all year they have plenty of capital.
I'm curious to know what contractual services Robert Gray provided that earned him a $35 million bond? A quick search on the Internet shows Swiss Imperial does simple accounting work (http://www.manta.com/coms2/dnbcompany_v264z9). So why would a forex dealer be billing an accountant $35 milllion? Isn't it supposed to work the other way around?
Hmmm. This is interesting. So the bond and cash are not sitting in a brokerage account for FXLQ. The bond and cash are actually sitting in Switzerland at Swiss Imperial in an account marked "Malory?" Now that sounds very fishy indeed.
No worries, Mr. Gray can just request the funds be transferred back to the U.S. to FXLQ's domestic bank/brokerage account right? Right? RIGHT?!!!
You have got to be kidding me. Let's see, Robert Gray is transferring nearly $48 million in cash and securities and he "doesn't recall" the name of the bank the money is going to?! How can he sit there and tell the NFA that with a straight face? He probably wasn't. I can picture him now scrunched up in the corner of his office, shivering and biting his nails like a man about to be water boarded trying to tell the NFA anything if they'll just go away and let him get back to reaming traders unfortunate enough to sign up with him:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=75753&highlight
Is Robert Gray a complete idiot? Why the hell would you lie to the NFA and give them a fake account number KNOWING NFA is going to check to see if this account actually exists?
Why didn't Rob Gray just get on an airplane and fly out of the country? Why go through this farcical con job in light of the fact that a two year old could see through this BS? But no, Gray continues to spin like Larry Craig after getting caught with his pants down in a Minneapolis washroom.
"non-current assets." How about "never-were assets." It looks like FXLQ created this bond out of thin air to fatten up their balance sheet. What's the matter FXLQ? Are you ashamed to be a poorly capitalized firm?
It's one thing to fib about your company assets. But are they doing this to cover up huge company losses which has left them $10 million in the hole? That of course is the nightmare scenario and could explain why Gray has been desperately trying to throw the NFA off his tracks.
This case is pretty serious. And I wouldn't be surprised if the feds break down the door of FXLQ and raid the place. If this bond is fictitious that is the kind of fraud that gets you thrown in the slammer for a number of years. This isn't just a matter of having shoddy book keeping as we have seen with firms such as One World Capital or Concorde Financial. This sounds like gross fraud and if FXLQ is indeed in the hole to tune of $10 million a lot of people are gonna get hurt. It's time to come clean Mr. Gray. What the hell is going on at Forex Liquidity?
Of all the scandals I have reported on to date this one is by far the most disturbing. The main reason is because FXLQ appears to have defrauded, not just the trading public, but more importantly U.S. regulators. And did it in such a bold manner as to send chills down the spines of anyone concerned about due diligence.
Yesterday the NFA took a member responsibility action against Forex Liquidity that prevents them from accepting any new customers, distributing customer funds without their approval, and requires that FXLQ provide NFA with a full accounting of their financials, which they have been unwilling to do as of this date:
http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0362216&case=07MRA00013&contrib=NFA
Why has the NFA taken this action? Let's go right to the source, the NFA auditor's own affidavit:
In August 2007, during an examination by NFA, NFA noted that FXLQ's June 30,2007, 1-FR-FCM listed as current assets securities with a market value of $35 million. FXLQ represented that this amount was solely attributable to a bond issued by ABN-AMRO. FXLQ further represented that this bond was being held at Malory Investments, a registered broker-dealer.
Ah yes, FXLQ reported adjusted net capital of $36 million on their last CFTC report. These guys have been telling regulators all year they have plenty of capital.
FXLQ has represented to NFA that it obtained the ABN-AMRO bond from its president and principal, Robert Gray, who in turn obtained it from a company called Swiss Imperial Trust A.G. in exchange for contractual services.
I'm curious to know what contractual services Robert Gray provided that earned him a $35 million bond? A quick search on the Internet shows Swiss Imperial does simple accounting work (http://www.manta.com/coms2/dnbcompany_v264z9). So why would a forex dealer be billing an accountant $35 milllion? Isn't it supposed to work the other way around?
On November 28, 2007, NFA received documents from the Financial Industry Regulatory Authority (Finra) (formerly NASD) evidencing that the ABN-AMRO bond and cash, which FXLQ represented were being held at Malory, were actually being held in Switzerland by Swiss Imperial in an account in the name of Malory. NFA has obtained information indicating that the owner of Swiss Imperial is also a part owner and principal of Malory.
Hmmm. This is interesting. So the bond and cash are not sitting in a brokerage account for FXLQ. The bond and cash are actually sitting in Switzerland at Swiss Imperial in an account marked "Malory?" Now that sounds very fishy indeed.
As it appeared that the ABN-AMRO bond had never left the possession of Swiss Imperial, and that the information provided by FXLQ regarding where the bond and other firm assets were being held were not accurate, NFA informed FXLQ that it did not exercise sufficient control over the bond and the cash held by Swiss Imperial to qualify them as current assets. Accordingly, on November 29, 2007, NFA directed FXLQ to cause all firm assets being held at Swiss Imperial to be transferred to a regulated United States financial institution by 5:00p.m. on Friday, November 30th, and provide evidence of such transfer.
No worries, Mr. Gray can just request the funds be transferred back to the U.S. to FXLQ's domestic bank/brokerage account right? Right? RIGHT?!!!
The same day that NFA directed FXLQ to execute the transfer described above, FXLQ represented that it was unaware that the ABN-AMRO bond and firm cash were being held at Swiss Imperial, FXLQ, however, represented that it had been working on transferring the ABN-AMRO bond and firm cash to a United States bank for approximately a week. When NFA asked for the name of the bank to which the assets were being transferred, Gray was unable to recall the full name of the bank, but indicated it included the word "Commonwealth" in its name.
You have got to be kidding me. Let's see, Robert Gray is transferring nearly $48 million in cash and securities and he "doesn't recall" the name of the bank the money is going to?! How can he sit there and tell the NFA that with a straight face? He probably wasn't. I can picture him now scrunched up in the corner of his office, shivering and biting his nails like a man about to be water boarded trying to tell the NFA anything if they'll just go away and let him get back to reaming traders unfortunate enough to sign up with him:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=75753&highlight
On December 1, 2007, FXLQ sent e-mails to NFA in which it represented that the transfer had been effected from Swiss Imperial to "Commonwealth." FXLQ represented that the transfer only included cash, thereby suggesting that the ABN-AMRO bond had been liquidated.
On December 3rd, FXLQ represented to NFA that the transfer had been made to Commonwealth Financial Network, a registered broker-dealer, and provided NFA with an account number and CFN's web site address.
On December 4, 2007, NFA spoke with CFN and the firm represented that it did not have an account for FXLQ and that the account number that FXLQ provided to NFA was fictitious.
Is Robert Gray a complete idiot? Why the hell would you lie to the NFA and give them a fake account number KNOWING NFA is going to check to see if this account actually exists?
On December 4, 2007, FXLQ's General Counsel forwarded to NFA a letter from a firm identifying itself as "Commonwealth Financial P.M.S", which indicated that FXLQ c/o Robert Gray has funds in the amount of $47,800,000 on deposit in an account at Commonwealth Financial P.M.S. This letter contained CFN's website address. NFA subsequently spoke with CFN's chief compliance officer who indicated that Commonwealth Financial P.M.S. is not in any way affiliated with CFN. NFA staff then informed FXLQ's General Counsel that CFN has represented to NFA that it does not have an account for FXLQ, the account number provided to NFA was fictitious, and Commonwealth Financial P.M.S. is not in any way affiliated with CFN.
The Commonwealth Financial P.M.S. letter was purportedly signed by an individual named Tom Smith. NFA spoke with Tom Smith on December 4, 2007, who confirmed the contents of the letter and stated that Commonwealth Financial P.M.S. was a registered broker-dealer and provided NFA with the firm's purported CRD number. NFA then contacted FINRA and learned that the CRD number provided by Tom Smith was that of a former broker dealer that has not been registered since 1991. FINRA also confirmed that Commonwealth Financial P.M.S. is not currently a registered broker.
Why didn't Rob Gray just get on an airplane and fly out of the country? Why go through this farcical con job in light of the fact that a two year old could see through this BS? But no, Gray continues to spin like Larry Craig after getting caught with his pants down in a Minneapolis washroom.
On December 3rd, FXLQ also provided NFA with net capital computations that purported to show that, as of November 30, 2007, FXLQ is in capital compliance. One computation purported to show the assets that FXLQ claims are at "Commonwealth." A second computation purported to show that even if the assets that FXLQ claims are at "Commonwealth" are non-current assets the firm would be in capital compliance.
"non-current assets." How about "never-were assets." It looks like FXLQ created this bond out of thin air to fatten up their balance sheet. What's the matter FXLQ? Are you ashamed to be a poorly capitalized firm?
FXLQ's October 31, 2007, Form 1-FR-FCM included a liability of accounts payable and accrued expenses of approximately $10 million, which was not included, however, in either of FXLQ's November 30th net capital calculations. On December 3, 2007, NFA requested that FXLQ provide evidence that the accounts payable and accrued expenses listed on its October 31, 2007, 1-FR-FCM had been paid.
Both of FXLQ's November 30th calculations also indicated that over $11.2 million of FXLQ's assets are being held at Malory. FINRA has advised NFA, however, that is has been unable to confirm that Malory's bank accounts have anything approaching this amount.
It's one thing to fib about your company assets. But are they doing this to cover up huge company losses which has left them $10 million in the hole? That of course is the nightmare scenario and could explain why Gray has been desperately trying to throw the NFA off his tracks.
On December 4, 2007, NFA directed FXLQ to transfer funds that it claims are at Malory to the firm's bank account at US Bank. Further, NFA again directed FXLQ to provide evidence that the accounts payable and accrued expenses listed on its October 31, 2007. NFA gave FXLQ until 3:00pm to comply with these directives and FXLQ failed to comply.
This case is pretty serious. And I wouldn't be surprised if the feds break down the door of FXLQ and raid the place. If this bond is fictitious that is the kind of fraud that gets you thrown in the slammer for a number of years. This isn't just a matter of having shoddy book keeping as we have seen with firms such as One World Capital or Concorde Financial. This sounds like gross fraud and if FXLQ is indeed in the hole to tune of $10 million a lot of people are gonna get hurt. It's time to come clean Mr. Gray. What the hell is going on at Forex Liquidity?
forexsavior
Could you please add a new firm to your well canalized ( $46 million ) list, also 80 years of upstanding business and unmatched ethics should get them on top of your list.
Here is the scoop..
One of the one of the largest, oldest, well respected futures firms in the US recently opened their doors to Forex traders, this is ground shaking news especially when their platform of choice is MT4, wow net cap of $46 million of net capital and 80 years in business.
With so many broker choices, it can be difficult to find a reliable place to trade. At Tradeview Forex, every process, from account setup to funds redemption, is streamlined, and your transactions are executed with speed and precision. Most importantly, you receive a high level of service from a firm that has a tradition of serving serious investors for over 80 years. There are a variety of reasons Rosenthal Collins Group is a good fit for your trading needs. Not only because the size and strength of RCG, but also because RCG values the integrity and ethics of the marketplace.
Please visit our website: www.tradeviewforex.com
I believe that an account at RCG is beneficial for anyone looking for the security and stability of a large FCM, but with the understanding and customer care of a smaller firm. Below are just a few key points that distinguish RCG from other firms:
⢠Ranked by Futures magazine as #21 out of the top 50 brokers in the world
⢠Second largest independent FCM
⢠$46 million of net capital
⢠$735 million in customer assets, 20,000 accounts, assets over 4 billion
⢠Can trace its roots back to 1923
⢠Online accounts â streamlined setup: approval within a day
⢠24 hour trading support
⢠Three options for accounts: Tighter spreads, higher interest, or straight through processing
⢠Utilizes familiar MetaTrader 4 software
Happy holidays and prosperous New Year,
TrdaeView Forex Team
www.tradeviewforex.com
Could you please add a new firm to your well canalized ( $46 million ) list, also 80 years of upstanding business and unmatched ethics should get them on top of your list.
Here is the scoop..
One of the one of the largest, oldest, well respected futures firms in the US recently opened their doors to Forex traders, this is ground shaking news especially when their platform of choice is MT4, wow net cap of $46 million of net capital and 80 years in business.
With so many broker choices, it can be difficult to find a reliable place to trade. At Tradeview Forex, every process, from account setup to funds redemption, is streamlined, and your transactions are executed with speed and precision. Most importantly, you receive a high level of service from a firm that has a tradition of serving serious investors for over 80 years. There are a variety of reasons Rosenthal Collins Group is a good fit for your trading needs. Not only because the size and strength of RCG, but also because RCG values the integrity and ethics of the marketplace.
Please visit our website: www.tradeviewforex.com
I believe that an account at RCG is beneficial for anyone looking for the security and stability of a large FCM, but with the understanding and customer care of a smaller firm. Below are just a few key points that distinguish RCG from other firms:
⢠Ranked by Futures magazine as #21 out of the top 50 brokers in the world
⢠Second largest independent FCM
⢠$46 million of net capital
⢠$735 million in customer assets, 20,000 accounts, assets over 4 billion
⢠Can trace its roots back to 1923
⢠Online accounts â streamlined setup: approval within a day
⢠24 hour trading support
⢠Three options for accounts: Tighter spreads, higher interest, or straight through processing
⢠Utilizes familiar MetaTrader 4 software
Happy holidays and prosperous New Year,
TrdaeView Forex Team
www.tradeviewforex.com
Breaking News: NFA Sanctions Velocity4x!
NFA is on the war path right now. This is the Fifth poorly capitalized firm they have disciplined this week. If you are a customer of Hamilton Williams or Velocity4x or whatever the hell they call themselves get your money out now. And for the Love of God stay away from poorly capitalized firms! They are dropping like ten pins.
http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0358241&case=07BCC00015&contrib=NFA
NFA is on the war path right now. This is the Fifth poorly capitalized firm they have disciplined this week. If you are a customer of Hamilton Williams or Velocity4x or whatever the hell they call themselves get your money out now. And for the Love of God stay away from poorly capitalized firms! They are dropping like ten pins.
http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0358241&case=07BCC00015&contrib=NFA
COMPLAINT:
On May 18, 2007, NFA issued a Complaint charging Hamilton with use of deficient promotional material by non-Member solicitors. The Complaint also charged Hamilton with failing to maintain adequate books and records necessary and appropriate to conduct its business. Finally, the Complaint charged Hamilton with failing to take applicable concentration charges; failing to maintain adequate adjusted net capital; and failing to collect the required minimum security deposit.
ANSWER:
On July 5, 2007, Hamilton filed an Answer to the Complaint in which it denied the material allegations contained therein.
DECISION:
On December 5, 2007, Hamilton was ordered to pay a $90,000 fine. Hamilton was also ordered to cease to accept accounts or receive compensation, directly or indirectly, for forex transactions that are introduced by any person unless that person: (1) is an NFA Member, Associate of NFA, or pending approval as an NFA Member or Associate and is not subject to a Notice of Intent to Deny or Revoke registration; (2) is a member or associated with a member, of a national securities association registered under Section 15A(b) of the Securities Exchange Act of 1934 and is operating pursuant to such membership or association; or (3) would be exempt from CFTC registration if such person were acting in the same capacity in connection with exchange-traded futures products.
The Running Man: Part I
The NFA is as busy as the Post Office on Tax Day. I haven't even had a chance to chew over the closing of FXLQ or One World Capital yet due to the continuing complaints and emergency actions the NFA is cranking out this week. Nor have I gotten a chance to talk about the Solid Gold or Velocity4x complaints. That's because the Savior must prioritize. And the latest priority is a forex firm that went by the name of Tradeco which just got banned for life by the NFA. http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0359745&case=07BCC00031&contrib=NFA
Frankly I had never even heard of this company before the NFA banned them yesterday. But I have heard of their former principal, Mr. Ryan Nettles. It seems like Nettles has been involved in every forex boondoggle of the last decade. There is the Tradex debacle and the Finex Fiasco. And there was a dodgy outfit per Forex Bastards by the name of Futures and Options of Texas that went out of business in 2001: http://www.forexpeacearmy.com/public/review/www.tradexfx.com
In short, Mr. Nettles gets around. Between 1997 and 2004 Nettles was registered with six different futures firms with the NFA: http://www.nfa.futures.org/BasicNet/Details.aspx?entityid=0278234&rn=Y
Today most of those firms are out of business. But it wasn't until 2004 that Nettles really seemed to hit his stride.
For it was in 2004 that Nettles applied to be a principal with the Tradex Group. Ah yes, Tradex. The very name of this firm makes the bile rise in one's throat. The Tradex Group was banned in 2006 by the NFA and earlier this year the mutated offspring of the Tradex Group, Tradex Swiss AG, was shut down in Switzerland and then thrown into bankruptcy leaving legions of traders stranded in purgatory.
http://www.nfa.futures.org/BasicNet/Case.aspx?entityid=0350721&case=06BCC00015&contrib=NFA
The implosion of the Tradex Group in 2006 was the source of a humorous article in Euromoney in which Craig Karlis of Tradex Swiss AG infamy and Ryan Nettles were at each other's throats like a couple of pitbulls from Michael Vick's Badnewz kennels. While the article is firewalled here are some choice quotes that indicate Nettles won't be able to get a good reference from his old employer anytime soon.
(http://www.euromoney.com/article.asp?PositionID=17358&ArticleID=1242197&p=1)
Karlis is quoted as saying, "Mr Nettles, while employed by Tradex Group, took it upon himself to start a CTA. he did this without Tradex knowledge. When that happened he put Tradex Group in control of the NFA... He had all his commissions sent to an account in the Bahamas. He Also had a dealing desk that offset all positions... After an audit all this information was revealed."
Nettles countered that, "I was just an employee. They told me to do this." Of course, he was just following orders. Where have I heard that before? In the end Nettles stated that, "He's pissed off at me for some reason. I also took my customers away from Tradex. That's why he's all pissed off at me." Ya think?
Question is where did he go to after his falling out with Karlis? Well Nettles isn't one to head over to the unemployment office and go on the dole. No Nettles quickly jumped ship and joined the doomed ocean liner: Tradeco Clearing Group LLC. Tradeco was actually the 100th firm to use Metatrader per a press release from the company. But after two months though Nettles hit the road and left Tradeco, he was after all born a rambling man.
But that didn't stop the NFA from issuing a complaint against nettles a year later. Indeed, it is a very strange case. Tradeco officially withdrew their membership from the NFA in August of 2007, one month before the NFA filed a complaint against them for fraud and failing to meet their capital requirement.
Furthermore, I can find no record of Tradeco on the CFTC capital reports at all for 2007. In fact, their last CFTC report was filed in August of 2006 when they reported that they were $750,000 below the minimum capital requirement. That's right, only a few months after they got their license they were not only violating their capital requirement, but failing to file any financial reports and still allowed to stay in business. That's an impressive accomplishment.
So what finally set the NFA off? It looks like they discovered all this during a 2007 audit of the firm. They must have done it right before Tradeco closed their doors. The examination is good for a laugh however. Highlights to come in Part II.
The NFA is as busy as the Post Office on Tax Day. I haven't even had a chance to chew over the closing of FXLQ or One World Capital yet due to the continuing complaints and emergency actions the NFA is cranking out this week. Nor have I gotten a chance to talk about the Solid Gold or Velocity4x complaints. That's because the Savior must prioritize. And the latest priority is a forex firm that went by the name of Tradeco which just got banned for life by the NFA. http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0359745&case=07BCC00031&contrib=NFA
Frankly I had never even heard of this company before the NFA banned them yesterday. But I have heard of their former principal, Mr. Ryan Nettles. It seems like Nettles has been involved in every forex boondoggle of the last decade. There is the Tradex debacle and the Finex Fiasco. And there was a dodgy outfit per Forex Bastards by the name of Futures and Options of Texas that went out of business in 2001: http://www.forexpeacearmy.com/public/review/www.tradexfx.com
In short, Mr. Nettles gets around. Between 1997 and 2004 Nettles was registered with six different futures firms with the NFA: http://www.nfa.futures.org/BasicNet/Details.aspx?entityid=0278234&rn=Y
Today most of those firms are out of business. But it wasn't until 2004 that Nettles really seemed to hit his stride.
For it was in 2004 that Nettles applied to be a principal with the Tradex Group. Ah yes, Tradex. The very name of this firm makes the bile rise in one's throat. The Tradex Group was banned in 2006 by the NFA and earlier this year the mutated offspring of the Tradex Group, Tradex Swiss AG, was shut down in Switzerland and then thrown into bankruptcy leaving legions of traders stranded in purgatory.
http://www.nfa.futures.org/BasicNet/Case.aspx?entityid=0350721&case=06BCC00015&contrib=NFA
The implosion of the Tradex Group in 2006 was the source of a humorous article in Euromoney in which Craig Karlis of Tradex Swiss AG infamy and Ryan Nettles were at each other's throats like a couple of pitbulls from Michael Vick's Badnewz kennels. While the article is firewalled here are some choice quotes that indicate Nettles won't be able to get a good reference from his old employer anytime soon.
(http://www.euromoney.com/article.asp?PositionID=17358&ArticleID=1242197&p=1)
Karlis is quoted as saying, "Mr Nettles, while employed by Tradex Group, took it upon himself to start a CTA. he did this without Tradex knowledge. When that happened he put Tradex Group in control of the NFA... He had all his commissions sent to an account in the Bahamas. He Also had a dealing desk that offset all positions... After an audit all this information was revealed."
Nettles countered that, "I was just an employee. They told me to do this." Of course, he was just following orders. Where have I heard that before? In the end Nettles stated that, "He's pissed off at me for some reason. I also took my customers away from Tradex. That's why he's all pissed off at me." Ya think?
Question is where did he go to after his falling out with Karlis? Well Nettles isn't one to head over to the unemployment office and go on the dole. No Nettles quickly jumped ship and joined the doomed ocean liner: Tradeco Clearing Group LLC. Tradeco was actually the 100th firm to use Metatrader per a press release from the company. But after two months though Nettles hit the road and left Tradeco, he was after all born a rambling man.
But that didn't stop the NFA from issuing a complaint against nettles a year later. Indeed, it is a very strange case. Tradeco officially withdrew their membership from the NFA in August of 2007, one month before the NFA filed a complaint against them for fraud and failing to meet their capital requirement.
Furthermore, I can find no record of Tradeco on the CFTC capital reports at all for 2007. In fact, their last CFTC report was filed in August of 2006 when they reported that they were $750,000 below the minimum capital requirement. That's right, only a few months after they got their license they were not only violating their capital requirement, but failing to file any financial reports and still allowed to stay in business. That's an impressive accomplishment.
So what finally set the NFA off? It looks like they discovered all this during a 2007 audit of the firm. They must have done it right before Tradeco closed their doors. The examination is good for a laugh however. Highlights to come in Part II.
The Running Man: Part II
We pick up the story in the summer of 2007. Tradeco is still technically in business although Nettles has long since cut his official ties to the firm. Here are the highlights of the NFA's complaint:
Two words: BUCKET SHOP
Bwahahahaha! Let that be a lesson to everyone. Just because someone throws up a website and makes grandiose statements doesn't mean they're legit.
Ah yes, the old "Fidelity 14 bond." I have seen firms toss this old lemon around in the forex industry to try and ease the concerns of customers worried about the safety of their funds. Whenever you see this old dog dragged out of the kennel that should sound the alarm bell in your head to put your money elsewhere as few serious brokers try to pawn that off on their customers.
Later in the complaint the NFA calls out Tradeco for not only failing to meet their capital requirements but for failing to even keep a general ledger. Guess that's why we never saw any reports on the CFTC website this year...
So who is to blame for this mess? The NFA tried to pin the blame on Nettles since he was "The director of operations for Tradeco and the firm's AML compliance officer. Accordingly, Nettles had supervisory responsibilities with regard to Tradeco's activities."
But Nettles strongly disagreed and in his response to the NFA's charges basically denied everything and said he had nothing to do with it. The NFA has not rendered a decision on his culpability, but they did find Tradeco guilty on all counts. Only problem is Tradeco no longer exists. No one ever replied to the NFA complaint which is probably still sitting in some over stuffed mailbox with all of Tradeco's other bills, flyers and court summonses. Talk about beating a dead horse...
So where is the running man today? Well last anyone heard he was involved in the "Finex Group." Traders at Forex Factory put the word out on Finex earlier in the year (http://www.forexfactory.com/showthread.php?t=34001&page=2) and sure enough a few months later Swiss authorities swooped in to freeze all of Finex's accounts (http://www.forexfactory.com/showthread.php?t=49010). In a rather droll email Finex agents told their customers:
No reason to be alarmed?! With Ryan Nettles on the scene traders should have EVERY REASON TO BE ALARMED. Of course they can always, "move to another country." And so the running man just keeps on running. Run Ryan! Ruuuuuuuuuuuuuuuuuuuuun!
We pick up the story in the summer of 2007. Tradeco is still technically in business although Nettles has long since cut his official ties to the firm. Here are the highlights of the NFA's complaint:
The website claimed that Tradeco's trading platform permitted customers to trade "from real time streaming quotes" with "greater ease in executing trades" on a platform that "has a proven track record of reliability and stability."
Tradeco, however, had not had a trading platform on which customers could trade since at least July 2006.
Two words: BUCKET SHOP
Tradeco's website further claimed that its platform provided "trading technology [that] is the result of over 5 years of development and today supports billion in monthly trade volume." The website also declared that "clients and partners from over 110 countries currently rely on our proven technology, execution, clearing services and administrative tools."
In addition to not having a trading platform, Tradeco only had approximately twenty customers from five different countries, none of which had actually traded through Tradeco.
Bwahahahaha! Let that be a lesson to everyone. Just because someone throws up a website and makes grandiose statements doesn't mean they're legit.
Through its website, Tradeco also claimed to be insured with "a fidelity 14 bond, which protects against loss resulting from fraudulent acts committed by an employee acting alone or in collusion with others."
When NFA inquired about the fidelity 14 bond, Tradeco was unable to provide any evidence that it had such a bond.
Ah yes, the old "Fidelity 14 bond." I have seen firms toss this old lemon around in the forex industry to try and ease the concerns of customers worried about the safety of their funds. Whenever you see this old dog dragged out of the kennel that should sound the alarm bell in your head to put your money elsewhere as few serious brokers try to pawn that off on their customers.
Later in the complaint the NFA calls out Tradeco for not only failing to meet their capital requirements but for failing to even keep a general ledger. Guess that's why we never saw any reports on the CFTC website this year...
So who is to blame for this mess? The NFA tried to pin the blame on Nettles since he was "The director of operations for Tradeco and the firm's AML compliance officer. Accordingly, Nettles had supervisory responsibilities with regard to Tradeco's activities."
But Nettles strongly disagreed and in his response to the NFA's charges basically denied everything and said he had nothing to do with it. The NFA has not rendered a decision on his culpability, but they did find Tradeco guilty on all counts. Only problem is Tradeco no longer exists. No one ever replied to the NFA complaint which is probably still sitting in some over stuffed mailbox with all of Tradeco's other bills, flyers and court summonses. Talk about beating a dead horse...
So where is the running man today? Well last anyone heard he was involved in the "Finex Group." Traders at Forex Factory put the word out on Finex earlier in the year (http://www.forexfactory.com/showthread.php?t=34001&page=2) and sure enough a few months later Swiss authorities swooped in to freeze all of Finex's accounts (http://www.forexfactory.com/showthread.php?t=49010). In a rather droll email Finex agents told their customers:
Finex Group GmbH is currently under audit of the Swiss Federal Banking Commission. The reason for this audit is to determine if Finex Group GmbH is required to have a bank license to offer forex trading in Switzerland . So at this time, please do NOT send any funds until we get the results of the SFBC. Regarding withdraws requests, we are told by the lawyers appointed by the SFBC that we canât process them until conclusion of this audit and we donât have a timeframe when this will happen as of today. We are in process of setting up another Finex Group company in another country that will take over the Finexâ FX business in Switzerland incase their final decision is that Finex Group is required to have a bank license to operate forex in Switzerland which at this time seems to be what that conclusion will be. There is no reason to be alarmed and we will either continue in Switzerland or move to another country.
No reason to be alarmed?! With Ryan Nettles on the scene traders should have EVERY REASON TO BE ALARMED. Of course they can always, "move to another country." And so the running man just keeps on running. Run Ryan! Ruuuuuuuuuuuuuuuuuuuuun!
Finalists for the Forex Dealer Dead Pool
Today the CFTC issued their final report on Net Capital before the new $5 million capital requirement rule goes into effect.
http://www.cftc.gov/marketreports/financialdataforfcms/
While this report details balances as of only October 31, it is the last piece of independent data the public can use before the bell tolls in a few weeks. And don't think these firms don't know that. Furthermore, in light of the FXLQ scandal, the numbers you see here are more likely to be overestimates of how much capital these firms have so be sure to factor that into the equation.
At this point in time any firm that still isn't reporting capital of over $5 million should be avoided by the trading public at all costs. The risk is too large and as One World Capital has shown it just isn't worth it. The following 10 firms should be avoided at this point in time as they are at high risk for going out of business. If you have money with them, take it out, NOW.
1) SNC Investments: $1,152,000
They are well below the $5 million capital requirement. It is highly unlikely they will make the new requirement at this point. I advise customers to leave this firm and look for greener pastures.
2) Wall Street Derivatives: $1,228,000
This firm is based out of New Zealand and I'm not even sure they have any U.S. customers as their U.S. website is out of service.
3) Advanced Markets: $1,322,000
Amifx is already teetering on the brink as they are the subject of a business conduct committee case before the NFA in which they are cited for a whole host of financial violations including not meeting the old capital requirement. This firm does not have much of a future.
4) Hamilton Williams (VelocityFX): $1,345,000
This firm is a train wreck. They just got fined $90,000 by the NFA for not meeting the old capital requirement. Then they lost their liquidity provider when FXLQ got shut down. Now they can't accept any customers from their unregistered introducing brokers. This firm is literally on life support. Do yourself a favor and stay the hell aware from them before the regulators pull the plug on them once and for all.
5) Solid Gold Financial: $2,040,000
Solid Gold's future is now in serious doubt. Like many of the other firms on this list they have been charged by the NFA with failing to meet their existing capital requirement. When you can't meet the old requirement it stands to reason you won't be able to meet the new one either. Solid Gold is anything but a solid investment at this point.
6) Bacera Corporation: $2,300,000
Like a turd that won't flush Bacera Corporation just refuses to go down the drain. The Savior wrote Bacera off over the summer as sources knowledgeable about them stated they were going to close up shop. But no, they are still hustling the folks in LA for fresh deposits. In September Bacera settled a complaint with the NFA after it was discovered they were undercapitalized to the tune of $1.2 million. NFA reported Bacera only has about 200 customers as it is. But to those 200, do yourself a favor and get yourself another broker because sooner or later the pipes are gonna get cleaned and these guys are going to get flushed once and for all.
7) GFS Futures & Forex: $2,353,000
This firm is in an especially tight fix. They offer 200:1 leverage which means they need to come up with $10 million. And as this number shows they are far, far away from that.
8) Forex Club: $3,320,000
They still have not hit the minimum $5 million mark. And don't forget since they are a market maker they have other financial requirements to meet as well. They still haven't publically done so.
9) Easy Forex: $3,789,000
Under siege for their sleazy sales tactics, it's hard to imagine the NFA isn't going to drop the hammer on them soon.
10) Money Garden: $5,035,000
While they have crept up over the $5 million mark MG is notorious for their 400:1 "flexi" accounts which will require MG put up a minimum $10 million in capital in addition to other financial requirements for being a market maker. They are not even close to doing this despite their CEO's insistence they could easily get the money last summer. It looks like this veteran of the industry is about to be forcibly retired.
And so this is where we stand as of Friday, December 7, 2007. The new $5 million capital requirement kicks in on Friday, December 21, 2007. Two weeks to go. Tick Tock. Tick Tock.
Today the CFTC issued their final report on Net Capital before the new $5 million capital requirement rule goes into effect.
http://www.cftc.gov/marketreports/financialdataforfcms/
While this report details balances as of only October 31, it is the last piece of independent data the public can use before the bell tolls in a few weeks. And don't think these firms don't know that. Furthermore, in light of the FXLQ scandal, the numbers you see here are more likely to be overestimates of how much capital these firms have so be sure to factor that into the equation.
At this point in time any firm that still isn't reporting capital of over $5 million should be avoided by the trading public at all costs. The risk is too large and as One World Capital has shown it just isn't worth it. The following 10 firms should be avoided at this point in time as they are at high risk for going out of business. If you have money with them, take it out, NOW.
1) SNC Investments: $1,152,000
They are well below the $5 million capital requirement. It is highly unlikely they will make the new requirement at this point. I advise customers to leave this firm and look for greener pastures.
2) Wall Street Derivatives: $1,228,000
This firm is based out of New Zealand and I'm not even sure they have any U.S. customers as their U.S. website is out of service.
3) Advanced Markets: $1,322,000
Amifx is already teetering on the brink as they are the subject of a business conduct committee case before the NFA in which they are cited for a whole host of financial violations including not meeting the old capital requirement. This firm does not have much of a future.
4) Hamilton Williams (VelocityFX): $1,345,000
This firm is a train wreck. They just got fined $90,000 by the NFA for not meeting the old capital requirement. Then they lost their liquidity provider when FXLQ got shut down. Now they can't accept any customers from their unregistered introducing brokers. This firm is literally on life support. Do yourself a favor and stay the hell aware from them before the regulators pull the plug on them once and for all.
5) Solid Gold Financial: $2,040,000
Solid Gold's future is now in serious doubt. Like many of the other firms on this list they have been charged by the NFA with failing to meet their existing capital requirement. When you can't meet the old requirement it stands to reason you won't be able to meet the new one either. Solid Gold is anything but a solid investment at this point.
6) Bacera Corporation: $2,300,000
Like a turd that won't flush Bacera Corporation just refuses to go down the drain. The Savior wrote Bacera off over the summer as sources knowledgeable about them stated they were going to close up shop. But no, they are still hustling the folks in LA for fresh deposits. In September Bacera settled a complaint with the NFA after it was discovered they were undercapitalized to the tune of $1.2 million. NFA reported Bacera only has about 200 customers as it is. But to those 200, do yourself a favor and get yourself another broker because sooner or later the pipes are gonna get cleaned and these guys are going to get flushed once and for all.
7) GFS Futures & Forex: $2,353,000
This firm is in an especially tight fix. They offer 200:1 leverage which means they need to come up with $10 million. And as this number shows they are far, far away from that.
8) Forex Club: $3,320,000
They still have not hit the minimum $5 million mark. And don't forget since they are a market maker they have other financial requirements to meet as well. They still haven't publically done so.
9) Easy Forex: $3,789,000
Under siege for their sleazy sales tactics, it's hard to imagine the NFA isn't going to drop the hammer on them soon.
10) Money Garden: $5,035,000
While they have crept up over the $5 million mark MG is notorious for their 400:1 "flexi" accounts which will require MG put up a minimum $10 million in capital in addition to other financial requirements for being a market maker. They are not even close to doing this despite their CEO's insistence they could easily get the money last summer. It looks like this veteran of the industry is about to be forcibly retired.
And so this is where we stand as of Friday, December 7, 2007. The new $5 million capital requirement kicks in on Friday, December 21, 2007. Two weeks to go. Tick Tock. Tick Tock.
FXLQ in Legal Limbo
I've gotten word that customers at FXLQ are not able to get their money out at this time. The mystery deepens as the search for the missing $35 million bond goes on...
I've gotten word that customers at FXLQ are not able to get their money out at this time. The mystery deepens as the search for the missing $35 million bond goes on...
FXLQ in Complete Chaos
For those of you caught in the FXLQ meltdown this thread at Forex Factory has some excellent information:
http://www.forexfactory.com/showthread.php?t=59150&page=3
This trader posted the following which shows you the incredible maelstrom that FXLQ is currently mixed up in:
If you have money at FXLQ, MultibankFX or any of the other brokers that clear through FXLQ GET YOUR MONEY OUT NOW IF YOU STILL CAN!
For those of you caught in the FXLQ meltdown this thread at Forex Factory has some excellent information:
http://www.forexfactory.com/showthread.php?t=59150&page=3
This trader posted the following which shows you the incredible maelstrom that FXLQ is currently mixed up in:
There are certainly strange things happening with this whole
situation. I have a 6 figure account with FXLQ and have been with them for about a year and a half, very happy with them until now, by the way. On Tuesday evening I started my "work day" during the Asian market and tried to put a pending order, to my surprise it would not take it, so after repeated attempts I called the trading desk and they gave me the news on the whole situation. As it was explained by them, it seemed like something that would be resolved in a day or two.
Nevertheless, I filled out a request to withdraw my funds and then went to the NFA link to read the whole case, which clearly portrays a picture of FXLQ making up capital assets with an inexistant Bond from ABN ARMO BANK (one of EU's biggest banks).
Now, I was worried, so I decided to take the next plane to LAX at
8:00AM EST (I live in South Florida). I was in their office by 12:30
PM PST and everyone seemed to be working normally along with two auditors from NFA. After speaking to one person and another and waiting for several hours I was told that they had been denied permission by Jenifer Sunu, from NFA in Chicago to disburse any of my funds. Unfortunately, it was too late to call her in Chicago so I had to wait until the next. . During this time, several of the company executives met with me, including Robert Gray, and they explained how they have funds in different financial institutions in Europe and that the NFA did not want to accept this and ordered them to repatriate all these funds, which they were in the process of doing, but this was not an overnight ordeal. Robert Gray said that this order to repatriate funds had come in on Monday and the Member Responsibility Action, came
in the next day (Tuesday).
The following morning I started calling Jenifer Sunu and finally,
after about 4 hours of failed attempts, she finally picked up the
phone. After listening to everything she had to say, I practically
lost all hope of getting my money back, or at least the whole thing. The first thing I asked her was, why she had not authorized FXLQ from giving me my money back and she responded that the audit shows that there is ten million dollars deficiency. In other words, (her words) she said that my position was that of any creditor and had the same importance, legally, as the phone bill, and therefore, if there is a shortfall of 10 million dollars, the creditors would receive their funds in the proportional amount of what is "left". She gave me an example of when a "bankrupt" company dissolves. She even said that this was a done deal on their part. That it was out of their hands and that the CFTC had been notified for them to name a liquidator and dissolve the company and pay creditors with whatever funds are left and they (CFTC) would be in charge of any charges or legal actions against the principals and/or executives..... In short, not much hope.
As soon as I hung up with her, I took off to FXLQ and met with Robert Gray and told him my conversation with Ms. Sunu. He was outraged and immediately called his lawyer into his office and they called Ms. Sunu. While the attorney was trying to reach her, Robert showed me how they had already received two wires from Europe, one for over two million and the other one for a million something.
A few minutes later, the attorney came back to Robert Gray's office and said that Jenifer Sunu, was denying everything (several other customers had also called with similar stories, some where told that they would be lucky to get 50 cents on the dollar). So they asked me, if I wanted to talk to her, which of course I did. We put her on speaker phone and she started by saying that I had misunderstood her, she acknowledged that FXLQ had already received 2 multimillion dollar wires from their offshore accounts and that in no way was this a done deal on the part of the NFA, completely contradicting herself from my
earlier conversation.
This, in a way, gave me renewed expectations but at the same time it is really strange that the NFA would bad mouth the company to the extent of practically giving me a verbal "death certificate" and then when confronted with the "patient" takes everything said back. Why?
As far as my perception, to me FXLQ has always showed honesty and integrity, at least compared to a big list of other FXBrokers I have had accounts with. I had many experiences where they honored and fixed, to my benefit errors created by MT4. As far as my face to face meetings with them last Wednesday and Thursday, I get the feeling that they are truly trying to survive this ordeal and the proof is in the millions that they repatriated on Thursday, which shows that instead of folding they ARE actually bringing money in. They think, that ounce they come out of this NFA persecution, they will prove to be stronger than before, which is obviously true, BUT the question is, if they are able to prove that their financial solvency is adequate and in line with what was previously reported, will they be able to continue business as usual or will the damage caused by this whole ordeal be too deep to recover?
I'd like to also mention that I asked Ms. Sunu in my first
conversation, what good is their monthly FCM Financial Data Report, if the information in it is not reliable; She answered that all companies are audited every year, but it seems that documents that were accepted last year, are now questionable. So what good is basing your decisions on choosing a broker on this report if its validity is questionable.
In general, I prefer to have the NFA than nothing at all, as most
other countries, but it definitely needs a lot of work to be an real
and effective controlling organization.
UPDATE: I just got a call from one of the executives that told me that they received another four million (I did not ask if they received anything on Friday) and they had been trying to get the NFA to authorize the release of customer funds but had no positive response yet and they expected to get the authorization, hopefully, by tomorrow.
Regards,
CMA
If you have money at FXLQ, MultibankFX or any of the other brokers that clear through FXLQ GET YOUR MONEY OUT NOW IF YOU STILL CAN!
Undercapitalization at ODL
Upon second glance at the latest CFTC Capital Report I have come across a rather alarming capital number for a firm that previously have been well above the $5 million minimum capital requirement. The firm is ODL securities and they reported only $2,566,000 in adjusted net capital. The previous month they reported over $9 million in adjusted net capital. That is quite a stunning drop.
But what makes ODL's current number even more disturbing is that in October the NFA gave ODL a beat down in a BCC action in which they charged ODL with a bucket load of financial requirement violations that seriously calls into question the manner in which this firm is run.
NFA Charges:
⢠F.R.SEC11(a)NEW - FDM MAINTAIN ADJUSTED NET CAPITAL
â¢F.R.SEC11(b)NEW - FDM TAKE CONCENTRATION CHARGE-UNAFFILIATED
⢠F.R.SEC11(c)NEW - FDM TAKE CONCENTRATION CHARGE-AFFILIATES
⢠F.R.Section 11 - LTM REPORTING
⢠C.R.2-10 - RECORDKEEPING FCMS/IBS
⢠C.R.2-36(b)(1) - CHEAT, DEFRAUD, DECEIVE FOREX CUSTOMERS
The NFA gives example after example of how this firm misreported its financial numbers and failed to meet the most basic financial regulatory requirements expected of a Forex Dealer.
http://www.nfa.futures.org/BasicNet/Case.aspx?entityid=0330396&case=07BCC00006&contrib=NFA
The NFA's final decision was as follows:
With ODL's net capital woefully below $5 million and in light of the NFA blowing the lid off ODL's appallingly bad book keeping and shoddy accounting practices I am putting out the warning to the trading public: Avoid ODL and if you have money at ODL it's time to get your money back and find yourself another broker.
Upon second glance at the latest CFTC Capital Report I have come across a rather alarming capital number for a firm that previously have been well above the $5 million minimum capital requirement. The firm is ODL securities and they reported only $2,566,000 in adjusted net capital. The previous month they reported over $9 million in adjusted net capital. That is quite a stunning drop.
But what makes ODL's current number even more disturbing is that in October the NFA gave ODL a beat down in a BCC action in which they charged ODL with a bucket load of financial requirement violations that seriously calls into question the manner in which this firm is run.
NFA Charges:
⢠F.R.SEC11(a)NEW - FDM MAINTAIN ADJUSTED NET CAPITAL
â¢F.R.SEC11(b)NEW - FDM TAKE CONCENTRATION CHARGE-UNAFFILIATED
⢠F.R.SEC11(c)NEW - FDM TAKE CONCENTRATION CHARGE-AFFILIATES
⢠F.R.Section 11 - LTM REPORTING
⢠C.R.2-10 - RECORDKEEPING FCMS/IBS
⢠C.R.2-36(b)(1) - CHEAT, DEFRAUD, DECEIVE FOREX CUSTOMERS
The NFA gives example after example of how this firm misreported its financial numbers and failed to meet the most basic financial regulatory requirements expected of a Forex Dealer.
http://www.nfa.futures.org/BasicNet/Case.aspx?entityid=0330396&case=07BCC00006&contrib=NFA
During the examination NFA discovered that ODL had failed to prepare an accurate net capital computation as of March 31, 2006. ODL had improperly classified cash held at a Cayman Island bank as a current asset when it should have been classified as a non-current asset, failed to properly account for customer debits, netted customer debits against other credits in non-related customer accounts, and failed to the appropriate haircut charge on money market funds held at a brokerage firm. As a result, ODL overstated its net capital by approximately $448,000.
ODL failed to take the applicable concentration charge on transactions with both unaffiliated and affiliated counterparties. This failure resulted in an overstatement of ODL's net capital by approximately $1.3 million on March 31, 2006 net capital computation.
As a result of adjustments to ODL's capital computation resulting from the violations referenced above ODL failed to maintain the required minimum adjusted net capital as of March 31, 2006.
NFA's review of ODL's financial statements during the examination revealed that ODL had also failed to maintain the required minimum adjusted net capital as of April 30, 2006.
Subsequent to NFA's examination, ODL has consistently failed to maintain the required minimum adjusted net capital. Specifically, ODL's adjusted net capital fell under the required minimum on May 31, 2006, August 25, 2006, September 30, 2006, November 10, 2006, November 17, 2006, November 30, 2006, December 1, 2006, December 22, 2006, and January 19, 2007.
The NFA's final decision was as follows:
ODL and King were ordered to be jointly and severally liable for payment of a $165,000 fine. Dubuque was ordered to pay a $3,000 fine. In addition, Dubuque was ordered to tape record, for one year, all conversations between himself and existing or potential customers; retain the tapes for one year from the date they are created; and make the tapes available to NFA upon request.
With ODL's net capital woefully below $5 million and in light of the NFA blowing the lid off ODL's appallingly bad book keeping and shoddy accounting practices I am putting out the warning to the trading public: Avoid ODL and if you have money at ODL it's time to get your money back and find yourself another broker.