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Class Action Lawsuit Against FXCM

  • #181
  • Feb 15, 2011 10:51am Feb 15, 2011 10:51am
Quoting TC East
One of the reasons they get away with it is because they are very smart how they do it. Getting slipped to your detriment for example: if they slipped you on 100% of your trades, it would become obvious quickly and yes you would leave quickly. But what if they only slip you say 75% of the time? And what if the slips are only 1/2 of a pip? You might notice, but you'd probably think it was just your imagination, or "that's just trading", or whatever.

These people are not stupid; they aren't going to make it that obvious. They are very smart...
That makes sense. But that still does not explain how this plaintiff decided to do something only after incurring a $150,000 loss over years? That to me, is still unexplainable and suspicious. Even if he didn't suspect that it's FXCM's fault, he would've pulled out just for the fact that Forex trading is not working for him. In the article, it states that he traded for years. If he has traded for years, then he's not a novice. Why did he wait that long? It's his waiting for so long that really puzzles me. Is this purely a lack of due dilligence on this trader's part or is there some other alterior motives there?

In your case, I am sure you pulled out long time ago and sought alternatives elsewhere and that is what I would imagine majority of traders would do, especially if they are not making any money from it anymore. I mean "slippages" happen all the time and to all brokers, but if it's to the point of not allowing one to make money, then one would've stopped and pulled out. Wouldn't you agree?
Make your losses in demo. Earn your profits live.
  • #182
  • Feb 15, 2011 10:57am Feb 15, 2011 10:57am
Quoting TC East
One of the reasons they get away with it is because they are very smart how they do it....
I agree. You'll never know how bad FXCM is until you switch to another broker and suddenly all those 'trading' issues disappear. No more frequent slips. No more missed trades, no more missed exits. No more server freezes and outages, just no more sneaky crap. These little incidents just pile up with FXCM. No broker is perfect but you can tell by looking at any long trading chart if your getting played or not - When you see your strategy executed with mostly ideal exits and TP's/SL's executed almost to the pip or in your favor sometimes - You'll know you've found a good broker (preferably ECN)

This will NEVER happen with FXCM MT4 - Their system is clumsy and the numerous balance 'adjustments' with throw most any EA off that holds trades since they dont have access to these adjustments or rollover interest. Your EA's will have no way to accurately know how much interest has accrued on a trade and you'll close trades that you think are profitable but actually lost on interest.

If FXCM wanted to be the best ECN its easily within their grasp. (many have done it with far less resources) but instead they choose to be 50's Las Vegas Gangters and 'skim' the take. It's beyond my understanding why someone would rather be a thief than the best - when both will make you rich and being the best comes with better reputation and fewer legal hassle's.
  • #183
  • Feb 15, 2011 10:58am Feb 15, 2011 10:58am
Quoting Forexia
That makes sense....
I can't speak to why this guy lost $150K, but I don't think the issue is whether or not you are making money. What I'm contending is that FXCM artificially manufactures slips to their benefit and to your detriment (through software or however they do it). Whether someone is profitable or not isn't really relevant. If you're a loser, you're losing more; if you're a winner, you're winning less.

If they are doing this (and I believe they are), then it's wrong regardless, and they should be stopped and held accountable. But like I said I'm gone from there now, but honestly it did take me a while to get suspicious enough to leave, I think mainly because they do all this very subtly "under the radar" and so forth...
  • #184
  • Feb 15, 2011 11:02am Feb 15, 2011 11:02am
And there is also one funny thing, in that moment I was very surprised, they took my money out off my account cus I was not trading some months. I leave my acc for some months to do some other things and when I will have time to trade I will continue and last month I receive msg from FXCM that if i will not do some trading in my acc they will punish me for 50$.
Ok 50$ is not big money for me but this action by self is unacceptable, they force you to trade, if not then 50$ is ours..WTF?
  • #185
  • Edited 1:37pm Feb 15, 2011 11:08am | Edited 1:37pm
Quoting eziC
And there is also one funny thing, in that moment I was very surprised, they took my money out off my account cus I was not trading some months. I leave my acc for some months to do some other things and when I will have time to trade I will continue and last month I receive msg from FXCM that if i will not do some trading in my acc they will punish me for 50$.
Ok 50$ is not big money for me but this action by self is unacceptable, they force you to trade, if not then 50$ is ours..WTF?
Other brokers including ECN brokers do that too. They charge you for the loss of revenue/commission that they could've earned.

$50 is pretty stiff I agree but it is a fee that they can charge as long as they disclosed to you in the first place in the contract.
Make your losses in demo. Earn your profits live.
  • #186
  • Feb 15, 2011 11:23am Feb 15, 2011 11:23am
Quoting Forexia
Increasing leverage and introducing FIFO does NOT change the core essence of the SPOT FX market; it just discourages small investors more from entering the market but forcing everybody to trade SPOT FX on an arbitrary "centralized exchange" does and that's why it won't succeed.

It's not for you to say whether it is possible or not, I am telling you it's not.
The leverage rules and FIFO / Hedging rules are to demonstrate things can change. 5 yrs ago we never could have fathomed such changes, that was my point. This happened after 9000 comments mostly in disagreement with the changes. (They will do what they want.)

The interbank market already exists and banks are getting more involved in providing liquidity to the OTC market. Heck banks are even getting involved in offering FX trading themselves.

You can tell me a centralized exchange is not possible all you want. That doesn't change anything. You don't make the rules they do. That is my point.
  • #187
  • Feb 15, 2011 12:42pm Feb 15, 2011 12:42pm
I just seen this... the same firm that filed against FXCM has now filed agains FXDD with a different set of plaintiffs... looking through the suits and comparing them they are very similar... make me wonder whos next!!!


Federal Court Action Alleges Fraud and Racketeering by FXDirectDealer, LLC

The Business Trial Group of Morgan & Morgan, P.A. has filed a class action lawsuit against FXDirectDealer, LLC (FXDD) alleging fraud and racketeering by one of the nation’s larger Forex dealers.

The lawsuit, filed on February 11 in the United States District Court for the Southern District of New York (Manhattan Division), is the second class action lawsuit filed by the firm against Forex dealers in the past week, alleging fraud, deceptive trade practices, and racketeering. On February 8, The Business Trial Group filed a similar case against Forex Capital Markets, LLC (FXCM). As in the FXCM case, the suit alleges that FXDD has defrauded thousands of customers using deceptive and unfair trade practices, including falsely portraying its Forex trading platform as “transparent,” when instead it is a “rigged game,” designed to systematically separate customers from their money.

The Plaintiff, Hugo Cruz, brought the action on behalf of himself and all other similarly situated FXDD customers, accusing FXDD of fraud by misrepresenting its trading platform as one that is free from dealer intervention or manipulation. Instead, Cruz alleges, FXDD uses a number of devices and tricks, including software applications, designed specifically to manipulate and interfere with customers’ trades.

Like the FXCM case, the suit alleges that FXDD uses specially designed software to manipulate trading and “loot” its customer accounts, and also that FXDD lures its customer by promoting a “demo account,” which was touted as providing customers with a true market trading experience. Instead, the suit alleges, the demo account does not reflect what FXDD does when the customer begins “live” trading.

Lead Trial Counsel Tucker H. Byrd, of the Morgan & Morgan Business Trial Group of Orlando, Florida, stated, “We are continuing to bring legal action for redress of wrongs that we believe have occurred to thousands of Forex customers for years by dealers who have been entrusted with their customer’s money. Unfortunately, many Forex dealers engage in questionable practices, and we intend to pursue any and all of them until we have put an end to these abuses.”

The Business Trial Group teamed up with the renowned Morgan & Morgan Class Action Group headed by attorneys Scott Weinstein and Andrew Meyer in filing this lawsuit. Attorneys James Byrd, Jr., J. Carlos Real and Damien Prosser of the Business Trial Group and Rachel Soffin and Tamra Givens of the Class Action Group round out the Morgan Forex team.
  • #188
  • Edited 6:17pm Feb 15, 2011 1:09pm | Edited 6:17pm
Quoting TC East
I can't speak to why this guy lost $150K, but I don't think the issue is whether or not you are making money. What I'm contending is that FXCM artificially manufactures slips to their benefit and to your detriment (through software or however they do it). Whether someone is profitable or not isn't really relevant. If you're a loser, you're losing more; if you're a winner, you're winning less.

If they are doing this (and I believe they are), then it's wrong regardless, and they should be stopped and held accountable. But like I said I'm gone from...
I agree, if FXCM is really found guilty of deliberately committing all of these alleged offences to the point of causing undue damage to the clients, then yes, they should be punished for what they did and that perhaps can serve as an example to other unscrupulous brokers out there for them to clean up their act before anything happens to them.

But in this case, it's not the existence of these problems that's in question but how much and whether they are excessive and deliberate on FXCM's part. That's the issue here. Honestly, slippages and trade manipulation and software problems happens with all brokers and in all markets. I experienced slippages, trade manipulations, slow software, software crashes and everything even when I was trading stocks with a direct-access broker with Level 2 access on Nasdaq. You can't simply state that well, because this same thing doesn't happen with broker B so broker A must be bad and deliberately bad. All brokers are different. Some just offer higher quality of services than others.

The sheer question of profitability is relevant and questions the validity of the allegations because the financial industry is very unique in essence that profitability dictates everything and in this case directly dictates actions that a trader would take, in this case, losing situations. It took you only a while to figure out what FXCM was doing, but you took prompt actions. But he waited for years? Why? If he could wait for years to do something, is FXCM really being that deliberately excessively bad or is it because FXCM is just not providing a high quality of brokerage service?

And given that FXCM is really clever in covering their tracks which could be possible, then are you telling me that FXCM became the largest brokers in FX industry simply because ALL clients happen to be like this plaintiff, choose to endure years of losses and wait until their losses becomes six figures to do something? If you haven't noticed, he is, so far, still the sole plaintiff in this supposedly "class action" lawsuit.
Make your losses in demo. Earn your profits live.
  • #189
  • Edited 1:55pm Feb 15, 2011 1:21pm | Edited 1:55pm
Quoting pip_seeker
The leverage rules and FIFO / Hedging rules are to demonstrate things can change. 5 yrs ago we never could have fathomed such changes, that was my point. This happened after 9000 comments mostly in disagreement with the changes. (They will do what they want.)

The interbank market already exists and banks are getting more involved in providing liquidity to the OTC market. Heck banks are even getting involved in offering FX trading themselves.

You can tell me a centralized exchange is not possible all you want. That doesn't change anything. You...
I know they make the rules but I am saying I know how far rules will go in terms of changing the market structure of SPOT FX industry and a centralized exchange is not possible. It's like making a rule that says men must now carry babies and give birth instead of women if a couple ever wants to have children. It's a change in the rules but is it possible? And why is it not possible? Is it because I am saying so? No, because it violates the basic physiological characteristics between men and women.

It's the same thing here. Banks are giving more liquidity to OTC market, yes but notice it's OTC MARKET. That's OFF-EXCHANGE. They won't be willing to give the same liquidity to a centralized exchange for the reasons that I have already explained to you. And even if they do create a "centralized exchange" for SPOT FX, nobody will trade on it. But at the same time, we can make the OTC market better with better price transparencies via better ECN's and in turn make the industry better and more profitable for everybody. That's like knowing women have to continue to carry babies and give birth, but we can improve the obstricien technologies so women can give birth safer and more comfortable.

You can argue all you want but at the end, you will see I am right.
Make your losses in demo. Earn your profits live.
  • #190
  • Feb 15, 2011 1:40pm Feb 15, 2011 1:40pm
Quoting 1forex
I just seen this... the same firm that filed against FXCM has now filed agains FXDD with a different set of plaintiffs... looking through the suits and comparing them they are very similar... make me wonder whos next!!!


Federal Court Action Alleges Fraud and Racketeering by FXDirectDealer, LLC

The Business Trial Group of Morgan & Morgan, P.A. has filed a class action lawsuit against FXDirectDealer, LLC (FXDD) alleging fraud and racketeering by one of the nation’s larger Forex dealers.

The lawsuit, filed on February 11 in the United...
OMG, I knew this would happen. They are going on a witch hunt now attacking the entire Retail Forex industry. More losers being pursuaded by this greedy law firm that they can win by suing. Typical plot from that Grisham novel "King of Torts".

Pathetic!
Make your losses in demo. Earn your profits live.
  • #191
  • Feb 15, 2011 3:13pm Feb 15, 2011 3:13pm
Quoting Forexia
You can argue all you want but at the end, you will see I am right.
Or at some point you may realize you might be wrong.


(Quote) Article Link
FX market participants fear that FX will be lumped in with all other OTC instruments when it comes to the sweeping regulatory changes that are forecast for the OTC markets in general in the wake of the financial crisis. FX market players fear that regulators are mistakenly incorporating FX derivatives alongside more complex derivatives like CDOs. "Anything that is not a spot FX trade is put under derivatives," says Schorno. "FX market participants are doing their best to convince the regulators that FX is a different animal to a CDO."

Ernie Humphrey, senior director of membership and treasury programs for Proformative, an online community for corporate finance, accounting and related professionals, says that when it comes to regulation, the FX market needs to educate the government concerning the importance of FX exposure management as a risk mitigation tool and not let its associated derivatives, which are often just simple swaps and forwards, get lumped in with complex derivatives such as CDOs and CDS.

As FX is now traded as an asset class in its own right, some segments of the market are pondering whether trades should be moved on-exchange. However, Humphrey says, driving everything through an exchange could cause major issues, as firms conduct trades to match exact exposures and need to do so to qualify for certain accounting treatments.

Madgavkar believes the OTC FX market may change in the future as new legislation is likely to favor centrally cleared trading, especially in derivative products. However, he says, there needs to be greater movement toward cross-border regulation so that providers do not benefit from regulatory arbitrage.
(End Quote)


Remember the rules and regulations proposed by Frank-Dodd affect more than just Forex, and with that being said can and will have a ripple effect.
  • #192
  • Edited 3:37pm Feb 15, 2011 3:26pm | Edited 3:37pm
Quoting Forexia
I agree, if FXCM is really found guilty of deliberately committing all of these alleged offences to the point of causing undue damage to the clients, then yes, they should be punished for what they did and that perhaps can serve as an example to other unscrupulous brokers out there for them to clean up their act before anything happens to them.

But in this case, it's not the existence of these problems that's in question but how much and whether they are excessive and deliberate on FXCM's part. That's the issue here. Honestly, slippages and trade...
I understand what you're saying and your point about profitability is a good one, but I think you're missing an important point. The allegations here are that FXCM engaged in deliberate tactics for the sole purpose of defeating and/or bilking their traders. That's VERY different from not offering "a high quality of brokerage services." One is intended to cause the trader harm, the other is not. It's the intention that's at issue here.

Kind of like if somebody kills another person (sorry for the example). If they do it accidentally by backing over them in their car, that's a lot different from if they commit a pre-meditated act. In either case the victim still winds up dead, but the law looks at how to punish the perpetrator very differently, all based on intent. Intent with actual harm is what FXCM is accused of, and again that's a lot different from just being a "bad" broker that doesn't offer very good services.

Anyway, I guess we could debate this a long time , but wanted to mention that point in what's hopefully a good-natured manner...

Peace.

EDIT: re. this guy being the only one in the class action lawsuit right now, maybe that's the case, but FXCM has been accused of all this stuff informally for years. They have one of the worst reputations of any broker in the business. As to why they are so big, could be anything from having a good marketing VP, user friendly website, big advertising budget, etc. who knows...
  • #193
  • Edited 6:19pm Feb 15, 2011 4:26pm | Edited 6:19pm
Quoting TC East
I understand what you're saying and your point about profitability is a good one, but I think you're missing an important point. The allegations here are that FXCM engaged in deliberate tactics for the sole purpose of defeating and/or bilking their traders. That's VERY different from not offering "a high quality of brokerage services." One is intended to cause the trader harm, the other is not. It's the intention that's at issue here.

Kind of like if somebody kills another person (sorry for the example). If they do it accidentally by...
Yes that's what I said and I am glad you agree with me. It's not the fact that slippages and price manipulations exist in FXCM but whether they are excessive and/or deliberate that is in question and is yet to be determined.
Make your losses in demo. Earn your profits live.
  • #194
  • Feb 15, 2011 4:51pm Feb 15, 2011 4:51pm
Quoting pip_seeker
Or at some point you may realize you might be wrong.


(Quote) Article Link
FX market participants fear that FX will be lumped in with all other OTC instruments when it comes to the sweeping regulatory changes that are forecast for the OTC markets in general in the wake of the financial crisis. FX market players fear that regulators are mistakenly incorporating FX derivatives alongside more complex derivatives like CDOs. "Anything......
Ok, I am going to quote myself here because obviously you don't read my posts in its entirety.

Quoting Forexia
The most of what they are going to create is going to be another Currency Futures market but for Spot FX with super-thin liquidity and high margin that nobody wants to trade in and all of us small investors will have no choice but give up our business and go back to our day job slaving for those Big Banks.
Quoting Forexia
And even if they do create a "centralized exchange" for SPOT FX, nobody will trade on it.
Yes, I already forsaw that this would be something that those out-of-touch bubbleheads paper-pushers be contemplating of doing, just one more thing to kill off the Retail Forex industry but it's not going to work. People will still find ways to trade Forex off the exchange because SPOT FX is meant to be traded in a structure with clusters of network and not in a central exchange.

Going back to my previous metaphor, forcing men to give birth instead of women will just result in no babies and the entire human race going extinct. But there will still be people who will go underground and have women give birth in order to survive.

Even now there are people like Erie Humphrey who still agrees with me and realizes that "driving everything through an exchange could cause major issues, as firms conduct trades to match exact exposures".
Make your losses in demo. Earn your profits live.
  • #195
  • Edited 6:33pm Feb 15, 2011 6:21pm | Edited 6:33pm
Quoting Forexia
Ok, I am going to quote myself here because obviously you don't read my posts in its entirety....
No, I read your post to it's entirety. The problem is you said it will "never" happen.

Quoting Forexia
They will NEVER be able to centralize the FX market.
Name one person in Washington that has the slighest idea of how OTC FX operates and fully understands every nook and cranny? That is the point I am trying to make. It will come in the form of legislation. If it becomes law to centrally clear all current OTC FX trades there is not one thing you have stated or could state that would change that fact.

I did say myself new rules (it was implied complications would exist) would have to be made, the exchange already exists and it's called the interbank market. If they were going to centrally clear the trades that is the market in which they would do it on. Whether that kills off OTC FX as we currently know it remains to be seen. Costs would likely go up but if you didn't have to worry about the broker slipping you it might not matter too much?

My main point being in all this: - "NEVER say NEVER". If the proposed law is petitioned to be commented on just how far would you get with "It will never work." as a comment?

Remember we sent them 9000 comments on the Farm Bill non-sense and what did that do? The talk now is transparency. Sorry, the only way you get to transparency is centrally cleared trades.

Difficulties in implementation doesn't matter at all to a lawmaker. Remember the FIFO mess discussions with MT4?

It "could" happen, the more cheater brokers that are exposed the more likely it will. The CFTC has it's hands full and the soup is getting thicker by the day.
  • #196
  • Edited 9:04pm Feb 15, 2011 7:45pm | Edited 9:04pm
Quoting pip_seeker
No, I read your post to it's entirety. The problem is you said it will "never" happen.
I said it will never happen as a real functioning centralized exchange. They can create a "central exchange" and force us to use it but nobody would use it and nobody would trade on it. So that's the equivalent of "never" happening.

Quoting pip_seeker
The exchange already exists and it's called the interbank market. If they were going to centrally clear the trades that is the market in which they would do it on.
Yes and the interbank is working just fine on ECN's. The difference between the interbank market and a central exchange is that trades are not PUBLIC. All trading parties can remain anonymous. And that will change if everybody is forced to trade on a central exchange then everything will be exposed.

Quoting pip_seeker
Whether that kills off OTC FX as we currently know it remains to be seen. Costs would likely go up but if you didn't have to worry about the broker slipping you it might not matter too much?
I am telling you it will. It will kill off the SPOT FX market because no BIG PLAYERS, banks or corporations would want to trade on it. They will find ways to trade with each other in private networks it's just that we, retail investors will get barred again because we will be forced to trade on paper-thin liquidity "central exchange". And since they are so big, there is nothing CFTC can do about them trading in private. All CFTC good for is getting the little guys like us.

As I already explained it to you, the reason why interbank exists now is because they can do their transactions and remain anonymous. Why do you think they would want to be forced to trade in the open? Would you want the whole world to know how much money you have and how much you have exchanged into which currencies on a realtime basis? Because that's the equivalent of forcing those BIG PLAYERS to trade on centralized open exchanges. And if the BIG PLAYERS are not part of the "centralized exchange"? Where is the liquidity coming from??? Without liquidity, with WHOM are investors going to trade with? The market is going to be gone and you are worrying about cost??!!

Quoting pip_seeker
Remember we sent them 9000 comments on the Farm Bill non-sense and what did that do? The talk now is transparency. Sorry, the only way you get to transparency is centrally cleared trades.

It "could" happen, the more cheater brokers that are exposed the more likely it will. The CFTC has it's hands full and the soup is getting thicker by the day.
Yeah, you have so much "transparencies" that you kill the patient. The irony is if CFTC REALLY wanted to do something about improving the Retail FX industries, the Retail FX industry would've been lot more honest and profitable long time ago. But then again, when has CFTC's heart ever been at the right place?
Make your losses in demo. Earn your profits live.
  • #197
  • Feb 15, 2011 7:48pm Feb 15, 2011 7:48pm
Quoting Usfx
I am glad that someone is going on a witch hunt as you say, it’s about time. Does anyone remember the major lawsuits in the late 80's in reference to NASDAQ? It’s the same thing, it took someone to step up and say enough is enough, and years of litigation pursued, and YES Law firms and their greedy attorneys got rich, BUT us small time traders got a much more fair market to trade after the dust settled, and the same thing is going to happen here.

[color=black][font=Verdana]I for one AM Glad....
So trade with an ECN broker or ask TC East here who is his broker since he states in his post that his broker is honest and he has none of the problems that he has had with FXCM. But that still does not rule out the possibility that this is a witch hunt and somebody is just trying to recoup their losses by suing.
Make your losses in demo. Earn your profits live.
  • #198
  • Feb 15, 2011 9:07pm Feb 15, 2011 9:07pm
Quoting Usfx
Maybe if the law was changed so it didn’t read you had to be licensed and a registered FCM/FDM to be a counter party to a trade. Let retail traders start adding to the liquidity and building a deeper pool to trade from. I know a few FX brokers have half heartedly tried.
Why not create a true ECN? That's what I have been advocating all along. Create good, robust ECN's with good orderflows and price transparencies so everybody can trade with everybody else. Thank you. And that's the direction that Retail Forex industry should go, if only all those regulators are really on the small investors' side.
Make your losses in demo. Earn your profits live.
  • #199
  • Feb 15, 2011 10:02pm Feb 15, 2011 10:02pm
Now that it looks like FXDD is also being sued I would not be surprised if more forex brokers end up having to defend this class action since they all use the same tricks. As for FXDD there is no doubt that they started to go the same way as FXCM about a year ago. So it comes as no surprise. I think that another well known and popular metatrader broker who used to have very large spreads will be next.
  • #200
  • Feb 16, 2011 12:23am Feb 16, 2011 12:23am
http://businesstrialgroup.com/2011/0...-forex-dealer/

FXDD next.

Snowball rolling down the hill and getting bigger, lets see if it becomes an avalanche.
consistency wins
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