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Proposed NFA Capital Requirement

  • #501
  • Nov 13, 2007 7:18am Nov 13, 2007 7:18am
So imagine one fine morning you wake up feeling bright and chipper. You have your morning coffee and scrambled eggs while listening to the banality of the local weather report. You look across the tv screen and see the currency rates scroll by. Hmmm, time to log into your currency trading account to see how your positions look. You are still long USD/JPY where you are taking a beating, hoping the pair will make a come back. In the meantime at least you can console yourself with the interest rate yield you’re getting.

But not anymore. Because if you’re a customer of E-FX Options you are spitting out your coffee at your computer screen right about now. Why? Because without almost any notice E-FX is closing its doors and liquidating all customer positions in two weeks.

Now had you been reading Forex Savior’s reports all along and taken him seriously you could have closed your account months ago knowing E-FX was a poorly capitalized firm that was well below the coming $5 million capital requirement. But for those poor sods stuck in positions at this doomed firm you are about to get the margin call from hell. Meanwhile, the rest of E-FX’s customers can expect the worst trade execution imaginable from a firm about to slip beneath the waves. Run Forrest, Ruuuuuuuuun!

Quote
Dear Customer,

We regret to inform you that due to the restructuring of E-FX Options, LLC (“E-FX”), that the trading platform will cease service on 30 November 2007. Arrangements are further explained as follows:

Effective 30 November 2007 at 5:00 pm US Eastern Standard Time (1 December 6:00am Peking Time), E-FX will no longer be the counterparty to customer positions and will not service customer accounts.

All open positions will be liquidated at the closing price on that day and subsequently, the account will be closed. You may also liquidate your positions at any time on or before the close of 30 November 2007 via the platform, at a price for which you find suitable.

Fund withdrawal instructions may be provided to E-FX via the trading platform or by completing the Withdrawal Form on the firm web Site http://www.efxo.com/html/download/e/withdrawal.pdf

In the event that E-FX does not receive withdrawal instructions by December 1st, we will automatically deposit the remaining balance of your funds to the bank account registered with the company in your new account application. If E-FX does not have bank instructions as of 30 November, our customer service department will contact you.

For inquiries, please do not hesitate to contact our customer service manager Joey To at the hotlines listed below.

Lastly, account statements will remain available on the trading platform through 9 December 2007.

We apologize for any inconvenience brought about by the above arrangements!

Yours truly,
E-FX Options, LLC

I like how they "apologize" for any inconvenience. These firms are so irresponsible it makes the head spin. This firm knew months ago they were not going to be able to make the $5 million requirement and yet they didn't make the slightest effort to warn their customers ahead of time. They just wanted to milk the cow until the very last moment. Well, the cow is being taken to the slaughterhouse and its E-FX's customers that are about to become hamburger meat.
  • #502
  • Nov 13, 2007 10:25am Nov 13, 2007 10:25am
Yes, another firm forced to close it's doors by the government lapdog of the large brokerages the NFA.

1 less competitor in the world for FXCM and the other large brokerages to worry about.

They are being forced to close their doors not because they did anything wrong, not because of some violation of their customers trust, but because they have been found guilty of trying to compete with the large brokerages.

They have 3.7 million dollars in funds above and beyond the total of their client accounts. They meet and exceed all current requirements for running a brokerage properly. They have not lost client money by trading against them, there is no evidence to prove they are hurting their clients in any way. The fact that big government can come into a free market and force control over it is disgusting and CANNOT benefit the individual trader or the market as a whole. Anyone that thinks so has had the wool pulled over their eyes. Less competition between brokerages can only hurt us as individual traders.

You paint them as the bad guy, when in actuality they are not guilty of anything that I have seen. This is simply 1 less competitor for the big brokerages to worry about, and 1 less reason they have to care about individual clients. Who needs customer service when there are no competitors left for clients to go to?


The NFA should regulate the market, the NFA should shut down brokerages that are below the current watermark of their clients (ie, if all clients closed accounts they would not have the funds to pay back), the government can even enforce action against brokerages that target their clients and seek to hurt them (However free market and word of mouth will regulate this as well). The government should Never be used as a tool for bigger businesses to shut down their competition.
The basis of a democratic state is liberty. ~ Aristotle
  • #503
  • Nov 13, 2007 11:26am Nov 13, 2007 11:26am
I'm all for competition but you are delusional. It is not simply about the net excess capital they have. The fact that a firm was only required previously to have a small amount of net excess capital means they are really small. In a market this big that means they are a small fish which can be gobbled up at any time. Most consumers are too stupid to see this on their own so the NFA thought they have to do it themselves. And with regards to competition, go to a smaller firm abroad then. There are plenty of firms based in Belize that will allow you to open an account. Oh, you don't like that they are not regulated? Well small firms that cannot meet a basic $5 million in excess shouldn't be allowed to be either.
  • #504
  • Nov 13, 2007 11:44am Nov 13, 2007 11:44am
Quoting forexsavior
I like how they "apologize" for any inconvenience. These firms are so irresponsible it makes the head spin. This firm knew months ago they were not going to be able to make the $5 million requirement and yet they didn't make the slightest effort to warn their customers ahead of time. They just wanted to milk the cow until the very last moment. Well, the cow is being taken to the slaughterhouse and its E-FX's customers that are about to become hamburger meat.
Wait, once again, more false information. Are you saying that E-FX Options customers are not going to get their money back? Because this has been the problem since Day One with you and your crusade...a lot of MISINFORMATION. You have continued to imply that if the requirement got moved to $5 million and a firm couldn't meet that requirement, then the customers would lose their money. And yet, that continues to not be the case. If someone wants to stay with E-FX Options until the end for whatever reason, let them. It wasn't their funds that were at risk. The e-mail states how to withdraw your funds.

Again, the pattern here is simple:

1) Requirement gets raised
2) Firm can't meet requirement
3) Customers are sent their money

You make it sound like that is not the case.
FXChant Singing the World of Forex
  • #505
  • Nov 13, 2007 12:48pm Nov 13, 2007 12:48pm
Quoting jamesanderson
I'm all for competition but you are delusional. It is not simply about the net excess capital they have. The fact that a firm was only required previously to have a small amount of net excess capital means they are really small. In a market this big that means they are a small fish which can be gobbled up at any time. Most consumers are too stupid to see this on their own so the NFA thought they have to do it themselves. And with regards to competition, go to a smaller firm abroad then. There are plenty of firms based in Belize that will allow you to open an account. Oh, you don't like that they are not regulated? Well small firms that cannot meet a basic $5 million in excess shouldn't be allowed to be either.
"Well small firms that cannot meet a basic $5 million in excess shouldn't be allowed to be either." At what point are you going to be saying "small firms that cannot meet a 10 million, 50 million, 250 million in excess..."

When does a firm Suddenly have the capital required to trade your measly account in a 2.5 trillion dollar market? Personally I trade with a Bigger firm abroad, I wouldn't risk my money in a market where the US government could shut down any brokerage the larger brokerages see fit tomorrow. I certainly won't trade with those larger brokerages either, been there, done that. I know how much they have to care about an individual account. However I will fight for the other brokerages right to exist, especially when they have done nothing wrong. The ONLY thing a smaller brokerage has going for it is it's reputation and customer service. They have huge incentives for excelling in these areas.

"Most consumers are too stupid to see this on their own so the NFA thought they have to do it themselves." Time and time again free market and the ability of people to make informed decisions has weeded bad business out of markets and lifted up the good businesses. A "Nanny state" and big government is not the answer. You want the government making decision on your money go to any number of socialist countries. You name a government agency that has performed better than private business in Any situation and I'll bow down.

No, I am not delusional. When you look at the US market in 5 years and see there are 3 huge brokerages as your only choices on where you can put your money and none of those brokerages have to give a damn about your individual account we'll see where you are then. At that point, it will be too late.
The basis of a democratic state is liberty. ~ Aristotle
  • #506
  • Nov 13, 2007 3:10pm Nov 13, 2007 3:10pm
Quoting fxchant
Wait, once again, more false information. Are you saying that E-FX Options customers are not going to get their money back?
No you said that. Perhaps you should get your focal lenses checked. If you want to talk about misinformation, that is precisely what your post is.

Quoting fxchant
You have continued to imply that if the requirement got moved to $5 million and a firm couldn't meet that requirement, then the customers would lose their money. yet, that continues to not be the case.
it has ALREADY HAPPENED as in the case of One World Capital where clients funds were frozen for months. But since you have never shown the slightest bit of interest in the stories of traders who can't get their funds out of busted firms I forgive you for not noticing.

Quoting fxchant
If someone wants to stay with E-FX Options until the end for whatever . reason, let them. It wasn't their funds that were at risk. The e-mail states how to withdraw your funds.
Sure customers can stay there if they want. And I'm sure they'll get wonderful execution and timely customer service. Sucks about that long USD/JPY position they might have taken though. Oh well, no sweat off FXChant's back. It ain't your money right?

Quoting fxchant
Again, the pattern here is simple:

1) Requirement gets raised
2) Firm can't meet requirement
3) Customers are sent their money
Ya that pattern worked real well with One World Capital didn't it? That pattern worked real well with CFG didn't it? That pattern worked real well with Forward Forex didn't it? That pattern worked real well with... (pick any recently shuttered undercapitalized broker.)

Again, my answer is Buyer Beware. And had the buyers at E-FX been reading my posts they would been warned about what might potentially happen. To the traders of E-FX, You're Welcome
  • #507
  • Edited Nov 14, 2007 6:36am Nov 13, 2007 10:28pm | Edited Nov 14, 2007 6:36am
The buying up of DirectForex is a pattern we'll likely see repeated several times. Interesting times.

Quoting forexsavior
it has ALREADY HAPPENED as in the case of One World Capital where clients funds were frozen for months. But since you have never shown the slightest bit of interest in the stories of traders who can't get their funds out of busted firms I forgive you for not noticing.
What happened at One World Capital has no direct bearing on E-FX. It's like saying that when my neighbor goes bankrupt because he defrauded the neighborhood in a scheme and doesn't even pay anything back, that means that the next neighbor that goes bankrupt will do the same thing. One doesn't directly affect the other. You could be right. You could just as easily be wrong.

I think you're likely right, after all, history often does repeat. But we'll see what happens with them.

Quote
Ya that pattern worked real well with One World Capital didn't it? That pattern worked real well with CFG didn't it? That pattern worked real well with Forward Forex didn't it? That pattern worked real well with... (pick any recently shuttered undercapitalized broker.)
And many of those firms also committed fraud leading to the undercapitalization too... it wasn't just a cap thing, as it *seems* to be for E-FX.

BTW, I'm just curious... how were some of the other firms you were warning about doing? Did that I-Trade place close its shutters yet? I mean, you were saying they were headed out... people better pull their money? And they of course went out of business.

::looks at CFTC report::

Oh... wait, they're at over 9 million now and still in business. Imagine what they could have been at if you hadn't panicked people about them online.

You're doing a good service in many ways, but you're not this omniscient source of foresight on each firm. We'll see what happens at E-FX. I wouldn't want to be there, but *so far* we haven't seen anything illegal yet.

Quote
Again, my answer is Buyer Beware. And had the buyers at E-FX been reading my posts they would been warned about what might potentially happen. To the traders of E-FX, You're Welcome
Granted, we don't know if they'll defraud any one of their customers of money until they do so, which I think is FXChant's point.
  • #508
  • Nov 13, 2007 10:41pm Nov 13, 2007 10:41pm
Quoting jamesanderson
Well small firms that cannot meet a basic $5 million in excess shouldn't be allowed to be either.
Seriously, with the volume in this market, what makes 5 million safe and 1 million not safe?

Heck, in a three trillion dollar market (daily), what makes 20 million safe?

Answer: Good management. It's not some arbitrary figure.

That said, the NFA is cleaning up the scene, and some good will come of that. But there is a danger in doing too much narrowing of the market and leaving too few competitors to best serve the clients/customers.
  • #509
  • Edited 11:33pm Nov 13, 2007 11:06pm | Edited 11:33pm
really if the NFA did this a few years ago we might be stuck with forex.com or fxcm and still have 5+ pip spreads.

competition is absolutely good for the customers

Why doesn't the NFA raise the bar even higher for firms like the two mentioned who have been allowed to operated for years with almost no capital required with ridicules spreads (I know if I was murdering people a few years ago I'm sure I would still be put away for it).

How many people on this thread trade w/ them maybe less 1% so by the NFA raising the capital requirements are they really helping the customers?

I wonder if we could get some info on; if any how much these larger firms contribute to lobbyist
  • #510
  • Nov 14, 2007 6:36am Nov 14, 2007 6:36am
Quoting forexfun
What happened at One World Capital has no direct bearing on E-FX. It's like saying that when my neighbor goes bankrupt because he defrauded the neighborhood in a scheme and doesn't even pay anything back, that means that the next neighbor that goes bankrupt will do the same thing. One doesn't directly affect the other. You could be right. You could just as easily be wrong.
Its more like saying when one neighbor gets arrested and fined he is the same as the next neighbor that simply moves away.

Quoting forexfun
Oh... wait, they're at over 9 million now and still in business.
Of course. They just transfered money over from their parent company and kept going. Atleast thats what alot of firms do. The number on the CFTC report doesn't necessarily reflect the amount of money the firm has access to. It better reflects the amount of money the firm wants the CFTC to see. Which is probably a good thing. If FXCM does this to their small competition, imagine what they could do to you if they thought you were a Big threat. Who knows what other government agencies are in their pocket.

Of course, I-trade was in trouble there for a while because they got taken to the cleaners by 1 trader. He came in and scalped them for X number of million then withdrew the money. Glad to see they didn't go out of business because of 1 scalper.
The basis of a democratic state is liberty. ~ Aristotle
  • #511
  • Edited 11:58am Nov 14, 2007 11:44am | Edited 11:58am
Lots to comment on here. First, I believe One World Capital and E-FX both have something in common that is highly relevant to this debate. They are both poorly capitalized. And poorly capitalized firms are the source of this industry's problems. That is my belief and I understand many do not share it. However, the NFA does share that belief which is why they are raising capital requirements to $5 million.

Now there have been some very good points raised about the competitive fairness of such a move. As a trader, I for one do not want to see an industry where there are only 3 or 4 firms left standing. That's why I don't think it a good idea to raise capital requirements any higher than $5 million, which is what the NFA recently hinted at. There will be plenty of firms left after the new $5 million rule goes into effect. So this notion that the industry won't be competitive is just silly. You'll still have the boutique shops along with the big boys. There will still be a great variety in the industry. Speads will continue to get tighter and service better. The big difference is that the chronic insolvency of forex broker dealers, the fraud and the lousy service associated with poorly capitalized firms will be for the most part absent. And I wholeheartedly welcome such a development.

Once again here is the latest updated list of poorly capitalized firms with the leverage they trade at. Remember, firms with leverage HIGHER than 100 to 1 will need $10 million in adjusted net capital:

IG Financial Markets ($1,017,000) [700 to 1 leverage]
Advanced Markets ($1,216,000) [100 to 1 leverage]
Wall Street Derivatives ($1,231,000) [Unknown]
SNC Investments ($1,301,000) [100 to 1 leverage]
One World Capital ($1,408,000) [100 to 1 leverage]
Hamilton Williams ($1,453,000) [100 to 1 leverage]
Solid Gold Financial ($2,101,000) [100 to 1 leverage]
GFS Futures & Forex ($3,078,000) [200 to 1 leverage]
E FX Options (going out of business)
Forex Club ($4,000,000) [100 to 1 leverage]
Easy Forex ($4,351,000) [50 to 1 leverage]
Money Garden ($5,507,000) [400 to 1 leverage]
  • #512
  • Nov 14, 2007 2:43pm Nov 14, 2007 2:43pm
Quoting forexsavior
No you said that. Perhaps you should get your focal lenses checked. If you want to talk about misinformation, that is precisely what your post is.



it has ALREADY HAPPENED as in the case of One World Capital where clients funds were frozen for months. But since you have never shown the slightest bit of interest in the stories of traders who can't get their funds out of busted firms I forgive you for not noticing.



Sure customers can stay there if they want. And I'm sure they'll get wonderful execution and timely customer service. Sucks about that long USD/JPY position they might have taken though. Oh well, no sweat off FXChant's back. It ain't your money right?



Ya that pattern worked real well with One World Capital didn't it? That pattern worked real well with CFG didn't it? That pattern worked real well with Forward Forex didn't it? That pattern worked real well with... (pick any recently shuttered undercapitalized broker.)

Again, my answer is Buyer Beware. And had the buyers at E-FX been reading my posts they would been warned about what might potentially happen. To the traders of E-FX, You're Welcome
Simply wrong on all accounts. No one said that firms couldn't go UNDER. That is the risk of trading with a deal desk, which means that they have to show a ton of risk trading against their customers. One World Capital and CFG are great examples. THEY WENT UNDER. They blew it. They showed bad risk and lost, and their customers paid the price.

None of that means that because one of these other firms that has less than $5 million doesn't get over that threshold by December, that their customers will not be able to withdraw funds. These are two completely different points and have been since the start, and you continue to mislead in that regard. I have said since the start that there are plenty of junk firms out there that are set up just to pocket money from their clients. One World counts in that group. So do some of the biggest, most heavily capitalized firms.

I'm going to go out on a limb and guess that at year end or shortly thereafter, one of the big boys is going to announce some significant write-offs from losses that they have to take against their customers. Maybe if that happens, people will come to understand that a $50 million net capital doesn't mean much if you lose $30 million trading against your customers, which is where the real risk lies.

Other than that, I stand by my comments against yours. The risk is in the activities of the firms more than it is in an arbitrary net cap minimum. Raising that minimum is fine, but doing so, in and of itself, doesn't mean that customers are going to lose their funds just because the firm is under the number.
FXChant Singing the World of Forex
  • #513
  • Nov 14, 2007 2:57pm Nov 14, 2007 2:57pm
Why would one of the big boys announce anything like that? None of them are publicaly traded companies, as far as i am aware, so they dont need to announce things like these. I also think they are extremly profitable, especially the big fx retailers wouldnt need to take such risks, they are reeking it in even if they play 'by the rules'. Just for reference, CMC Markets, a UK fx and CFD retailer, had a profit of USD 75 mio. before tax, and an estimated market cap of GBP 900 mio. (they are planning an IPO for 2008). And im sure CMC is way smaller than Oanda or FXCM and the likes. Why would they take risk against clients on that scale? Doesnt make sense to me.
  • #514
  • Nov 14, 2007 4:12pm Nov 14, 2007 4:12pm
Quoting fxchant
Simply wrong on all accounts. No one said that firms couldn't go UNDER. That is the risk of trading with a deal desk, which means that they have to show a ton of risk trading against their customers. One World Capital and CFG are great examples. THEY WENT UNDER. They blew it. They showed bad risk and lost, and their customers paid the price.

None of that means that because one of these other firms that has less than $5 million doesn't get over that threshold by December, that their customers will not be able to withdraw funds. These are two completely different points and have been since the start, and you continue to mislead in that regard. I have said since the start that there are plenty of junk firms out there that are set up just to pocket money from their clients. One World counts in that group. So do some of the biggest, most heavily capitalized firms.

I'm going to go out on a limb and guess that at year end or shortly thereafter, one of the big boys is going to announce some significant write-offs from losses that they have to take against their customers. Maybe if that happens, people will come to understand that a $50 million net capital doesn't mean much if you lose $30 million trading against your customers, which is where the real risk lies.

Other than that, I stand by my comments against yours. The risk is in the activities of the firms more than it is in an arbitrary net cap minimum. Raising that minimum is fine, but doing so, in and of itself, doesn't mean that customers are going to lose their funds just because the firm is under the number.
My argument has always been that poorly capitalized firms are at far greater risk for going under and to engage in fraud than larger firms. Furthermore, One World Capital Proves what I have been saying all along that the new capital requirement will not be met by some of these firms and that customers should take their business else where until these firms show they can survive under the new rules. Some One World customers did just that and saved their skins. Others got put through hell by One World. That example alone justifies what I have been writing all along.

The NFA agrees with that. That's why they increased capital requirements. Firms are closing their doors and will continue to close their doors right up to the capital requirement deadline, which is now just a month away.

Finally, the fact that firms like cfg were market makers is irrelevent. CFG went under because they were poorly run and poorly capitalized. That's why there hasn't been a single instance of a well capitalized NFA registered forex broker ever going insolvent. As for your prediction that a large forex broker is about to blow up, I'm all ears. Do you know something we don't?
  • #515
  • Nov 15, 2007 11:21am Nov 15, 2007 11:21am
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

For a firm already struggling to meet the coming $5 million capital requirement that’s another 100 grand the firm will have to cough up.
Here is a summary of the NFA’s original complaint:

Quote
On June 4, 2007, NFA issued a Complaint charging One World with failing to maintain required books and records, failing to meet its minimum adjusted net capital requirement, and failing to notify NFA that its books and records were not current. The Complaint also charged One World with using misleading promotional material and failing to adopt and enforce written procedures to supervise its associates and employees in the use of promotional material. Finally, the Complaint charged One World and Walsh with providing false and misleading information to NFA.

This was the NFA’s official decision in the One World Case:

Quote
On November 14, 2007, One World was ordered to pay a $100,000 fine and pay an additional fine of $50,000 unless certain conditions are met. Walsh was ordered to guarantee payment of the fines, in the event that One World fails to pay them.

The settlement of the case and the Decision does not relieve One World of its obligation to comply with all NFA Requirements, including capital requirements for FDMs and the increased capital requirements for FDMs which go into effect on December 21, 2007.

I like that comment at the end, “the Decision does not relieve One World of its obligation to comply with all NFA Requirements, including capital requirements for FDMs and the increased capital requirements for FDMs which go into effect on December 21, 2007.”

Hmm, seems to me like the NFA is worried that One World isn’t going to be able to make the new requirement. Hence this gentle reminder along with the demand Walsh pay up for One World should One World default on its payment!

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…
  • #516
  • Nov 15, 2007 5:04pm Nov 15, 2007 5:04pm
Quoting forexsavior
Finally, the fact that firms like cfg were market makers is irrelevent. CFG went under because they were poorly run and poorly capitalized. That's why there hasn't been a single instance of a well capitalized NFA registered forex broker ever going insolvent. As for your prediction that a large forex broker is about to blow up, I'm all ears. Do you know something we don't?
Didn't say they were about to blow up. Said someone would likely have to take a nice write-off of losses. It's just math and statistically likelihood is all.
FXChant Singing the World of Forex
  • #517
  • Nov 17, 2007 3:23am Nov 17, 2007 3:23am
Given that most of my dealings are done via IG markets, should I be withdrawing monies, to date I have had no problems
If we aren't supposed to eat animals..... why are they made out of meat??
  • #518
  • Nov 19, 2007 10:28am Nov 19, 2007 10:28am
Quoting AndrewM
Given that most of my dealings are done via IG markets, should I be withdrawing monies, to date I have had no problems
IG is based in the UK. As far as I know their UK operations are well capitalized. I have no idea what they are doing with their American affiliate and get the impression they don't pay much attention to it. Give them a call and find out if they will be accepting U.S. customers after the new rule goes into effect.
  • #519
  • Nov 19, 2007 10:32am Nov 19, 2007 10:32am
Three Jeers for Switzerland! Over the past year I have been documenting the sad collapse of Tradex Swiss AG. Tradex is one of the many unregulated firms that Switzerland allows to operate inside their borders without any serious oversight. When customers get burned Swiss Government officials are only too glad to sit on their hands, or in the case of Tradex, make the situation worse.

Example, customers at Tradex have been begging and pleading with Swiss authorities to grant Tradex the authority to release their funds, which they have inexplicably frozen with nary an explanation. After months of stonewalling Swiss Authorities have apparently informed the clients of Tradex that Tradex is now going into bankruptcy!

http://www.forexfactory.com/showthre...t=10894&page=5

The regulatory environment in Switzerland is a complete shambles. As such fx traders should avoid Swiss firms at all costs. The following Swiss firms are completely unregulated and by trading with these firms you risk suffering the same fate as has befallen the customers at Tradex Swiss AG. I repeat, YOU HAVE NO PROTECTIONS if you open an account with an unregulated Swiss firm.

Unregulated Swiss Brokers
Finex
Tradex Swiss AG
WestCapFX
ACM
MIG
DukasCopy
GFX Group (Forex.CH)
Crown Forex

Do not trade with these firms if you care about safety of funds. Here is an article from the Boston Business Review reporting on the latest from Tradex Swiss AG:

http://www.bizjournals.com/boston/st...l?ana=from_rss
Quote
Troubled Tradex may be forced into bankruptcy
Boston Business Journal - by Jackie Noblett Journal staff

Investigators for the Swiss Federal Banking Commission have recommended the Swiss government place Tradex Swiss AG, a foreign exchange trading shop operating out of Boston, into bankruptcy, according to a report and sworn statements filed in Suffolk Superior Court.

The specter of bankruptcy places into jeopardy a suit by dozens of Massachusetts Tradex investors that would ensure their funds are returned in full before other investors and creditors divide the company's assets. There are roughly 1,600 investors in 60 countries who have alleged claims to Tradex funds, according to court records.

The report was filed Oct. 25 in response to an order by Superior Court Justice Allan van Gestel as part of a legal battle over Tradex funds frozen in two Boston banks. Portions of the report translated from German to English state that "the Tradex group is very likely overindebted, and in any event, insolvent and therefore not fully able to fully meet its presumed obligations in a timely manner."

Swiss investigators Peter Lutz and Romeo DaRugna state in the report that customers of Tradex claim at least $15.3 million in receivables, of which $5 million have been claimed in U.S. courts. The investigation further concludes Tradex's assets are only $7.1 million, with $5 million frozen in a Boston branch of Bank of America account and $500,000 held by Sovereign Bank.

The SFBC was scheduled to meet Wednesday or Thursday to discuss the future of Tradex Swiss AG and its sister company, Swiss Garant. An affidavit by Lutz states "it is my sincere belief that the SFBC will order the liquidation and bankruptcy of Tradex at its Oct. 31/Nov. 1 meeting."

A spokesman for the SFBC said that as of press time, the court had not made a ruling on the future of the two companies.

As reported previously, Tradex is being investigated in Massachusetts for allegations that it was not properly registered in the state, according to the office of Secretary of State William F. Galvin. Most recently, Tradex investors have written letters to Attorney General Martha Coakley seeking assistance retrieving their funds.

If the Swiss government places Tradex into bankruptcy, which would be domesticated in U.S. Bankruptcy Court in Massachusetts, the cases filed in Suffolk Superior Court by former Tradex employees and investors attempting to recoup their funds would be nullified, and investors would have to file claims in bankruptcy court, said Liam Floyd, a lawyer for former Tradex manager Craig Karlis, who is suing Tradex for back pay.

But Floyd said he is not confident in the figures provided by the Swiss investigators, who he says have not done due diligence in securing Tradex's files and trading platform.

In a letter dated Oct. 23 to the SFBC, Nicolaas Jansen van Rensberg, a Tradex owner and executive stripped of powers as Swiss investigators took over the company, says that the report by Lutz and DaRugna contains "massive calculation errors, completely ... inappropriate methods of calculation, baseless and inflammatory accusations, libelous slander, suppositions based on total negligent and wholly inadequate methods of investigation."

Evan Fray-Witzer, attorney for Lutz and DaRugna, did not return calls. Meanwhile, Tradex's investors say they are becoming increasingly frustrated with the lack of communication and are taking matters into their own hands.
"Personally, I don't know what's going on," said Jenny Zhan, a trader who is not a part of any investor suits. "Even people with attorney, they don't know."

Zhan said the group is split on whether to wait out the current legal battle or to take further action.
  • #520
  • Nov 19, 2007 10:34am Nov 19, 2007 10:34am
I Would Like To Know If Northfinance Is Registered With Nfa.........
Everything is bare Making the best out of pips
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