In the last few weeks I have reported on two poorly capitalized/unregulated forex broker dealers who are currently holding customer funds hostage. Well, both firms appear to be in complete chaos judging from what’s going around on various bulletin boards.

We’ll start with NFA regulated One World Capital. Their troubles started earlier this year when the NFA inspected their books and discovered they were not meeting their financial requirements. The NFA said at the time, “One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."
http://www.nfa.futures.org/basicnet/...17&contrib=NFA

Since then One World has been losing staff and appears to be experiencing a severe cash crunch which has resulted in the halting of customer withdrawals, as detailed here:
http://www.goldenmoneytree.com/foru...r=asc&start=100

At the same time that my Inbox has been piling up with messages from distraught One World Capital customers now a report has come out at Forex Factory that One World is revoking a whole series of rollover interest payments on GBP/JPY trades as well:
http://www.forexfactory.com/showthr...700#post1576700

It came to my attention that 1World has resorted to dirty tactics in withholding profits/money from clients.

Sometime ago, 1World gave $40 or so per day in Swaps for LONG GBPJPY. Traders who made money on this have their profits and money withheld (indefinitely?). I also noticed about 6 weeks ago that swap rate for GBPCHF was zero for both long and short. This was already reported at StrategyBuilderFX forum. Was these swap rate an error or a deliberate Trap? After reading the horror stories, I suspect its a trap meant to screw traders.

How does this become a dirty ploy?

Assume you traded GBPJPY, made money in the process with 1World. Later they come to you saying, "Hey Mr Trader, you made money from a wrong swap rates and we are disqualifying them all". This includes the swaps you collected as well as the PIPS you made and to include ALL OTHER TRADES made after these trades; if these GBPJPY trades were not made, you wont have money to make further trades.". Remember, GBPJPY was soaring in June/July and these traders made money from it by going Long GBPJPY..

There are two possibilities being played here:
1. 1World did not hedge your trades with an upper tier broker (1World traded vs you); you made money and they now rescind those trades.
2. 1World hedged your trades with an upper tier broker. However, 1world now claims YOUR profits.
You dont earn swaps. you dont earn Pips. End of Story.
The trap is for traders to make positions on those pairs; if you did and after further trading (even with other pairs) made money, they will go to your account and "cancel" your profits claiming, these could not take place so there is no profit made.

Meanwhile, in Switzerland…

Tradex Swiss Ag is still at war with itself apparently. The SFBC is fighting with the Tradex office in Boston over who has the right to talk to the customers of Tradex Swiss AG. Meanwhile the customers, who just want their money back, have no choice but to watch this farce from the sidelines. I have posted the two dueling press releases below. UN-BELIEVALBLE:

From: Craig Karlis
Service address: 100 Franklin Street
Boston
Massachusetts
02110

To: All clients of Tradex Swiss AG

Date: 29 August 2007

Dear Clients

Re: "Hostile take-over" of Tradex Swiss AG (Boston office)

As most of you may be aware by now, Tradex Swiss AG is currently being investigated by the Swiss Federal Banking Commission (SFBC). This is not a criminal investigation but was ordered to determine whether Tradex Swiss AG needs a banking license in Switzerland to operate their business and structured products (please see the attached documents from the investigating trustees from Switzerland).

As a precautionary measure, your funds in the Bank of America account of Tradex were frozen on 3 July 2007, by the Swiss authorities in an effort to protect your interests. If protecting your money constitutes a "hostile take-over" as described in the e-mail from the Swiss Management, headed by Mr Nic M Jansen van Rensburg before the Swiss authorities took control of the company, then we are guilty. Since the "freeze" of your money the former management of the Boston office has initiated a suit in a Massachusetts court and obtained an injunction to protect your money - resulting in an injunction that prevents your funds being moved to Switzerland, as well as preventing Bank of America from dispensing any funds without the knowledge of all the parties involved. All legal expenses are solely financed by the previous management of the Boston office while the management in Switzerland has not paid its employees or other operating expenses (infra-structure) of the Boston office since June.

There was no "hostile take-over" by anyone in Boston and there are absolutely no direct or indirect relationship between Tradex Swiss AG and Boston Trading and Research LLC. The Swiss trustees were the ones who originally froze the account. I and the rest of the Boston management took the actions in court solely because they refused to inform any one in Boston as to the status of the accounts, and in fact would not communicate with us in any way. We have taken steps at our expense, to protect your interests and resolve your inconvenience, by getting your funds released and wired to you without delay.

To satisfy yourself about the true facts of the situation, you may consider obtaining concrete evidence/proof of the following from the Swiss Management:
• their efforts since 5 July 2007 to secure and get your money released,
• their response to your withdrawal request;
• the identity of their traders participating in their "capital guaranteed program";
• the opinion of the Swiss Federal Banking Commissions and other regulatory bodies about any guarantee of client funds, especially if it pertains to spot forex transactions (part of why the investigation was sanctioned);
• payroll details for the Boston office employees for July and August;

From myself and the former management of the Boston office of Tradex we can assure you of one thing only: We are doing everything within our power and the law to secure your funds in Bank of America and make sure it gets wired directly to you in terms of the Anti-money laundering regulations as soon as unfortunate matter is resolved. We have the "disadvantage" that we all live in Boston and have to make a living here.

From the attached documents it is clear that the Swiss trustees, appointed by the SFBC, are currently in control of Tradex Swiss AG for the duration of their investigation. If you have any queries feel free to contact any of the Swiss trustees at Lutz Rechtsanwälte: contact or call them at Tel +41 44 560 8080 or Fax +41 44 560 8090 or e-mail to Peter Lutz peter.lutz@lawyerlutz.ch ; Romeo Da Rugna romeo.darugna@lawyerlutz.ch ; Michael Bopp michael.bopp@lawyerlutz.ch .

Please accept our most sincere apology for the inconvenience cau sed by the continued transgressions of the SFBC prescriptions by the Swiss Management. In our opinion the best course of action would be to let the legal process, set in motion by myself and the Boston management, continue uninterrupted. I undertake to keep you up to date of any new developments or progress concerning our legal process against the Bank of America and Tradex Swiss AG.
Yours Sincerely
Craig Karlis

The SFBC responded in kind:

Memorandum

Mandate: SFBC / Tradex and Swiss Garant
Subject: Further information to clients of Tradex Swiss AG
to: Clients of Tradex Swiss AG / file
from: Dr Peter Lutz and Romeo Da Rugna
Date: 3 September 2007

Dear Madam, dear Sir,
we have informed earlier that the Swiss Federal Banking Commission (SFBC) has opened an investigation on Tradex Swiss AG ("Tradex"). The purpose of such investigation is to verify, whether the company has been conducting financial activities without the necessary homecountry licence. The SFBC terminated the signatory power of the former signatories of Tradex and appointed the undersigned Dr Peter Lutz and Romeo Da Rugna to carry out the investigation on behalf of the SFBC. The SFBC granted Dr Peter Lutz and Romeo Da Rugna the exclusive authority, with sole signatory power, to represent and act on behalf of Tradex.

Further to our former information we can give you the following update about the pending investigation: We are at the moment not in a position to complete our investigation since part of the management of Tradex refuses to cooperate with the undersigned and do not deliver requested information and documents in a complete and timely manner.

A part of the management of Tradex even filed a complaint against Tradex in Boston USA. Tradex therefore had to employ US counsel in order to defend this complaint which is seriously obstructing and delaying the pending investigation.

Without the complete information and documentation about all assets and liabilities of Tradex, we are not able to determine which clients and/or creditors have legitimate claims towards Tradex. Therefore, lacking this information and documentation, we can not find out, and we consequently can not exclude, whether there is any risk of preferential treatment of
creditors if now payments are made to individual clients and/or creditors.

Until we do not have a complete overview on all of Tradex' assets and liabilities, we are therefore not in a position to make any transfer to clients and/or creditors of Tradex.

We finally would like to inform that none of the messages which have been sent since 3 July 2007 by the management of Tradex have been authorised by the undersigned. Such messages and information therefore do not reflect the opinion of the undersigned. As soon as the investigation will be completed, you will receive further information.

Yours sincerely
DR PETER LUTZ AND ROMEO DA RUGNA
Investigators appointed by the Swiss Federal Banking Commission

If it is any consolation to the traders stuck in these two firms both the NFA and SFBC are making big changes to try and keep these kinds of things from happening again (NFA by raising capital requirements and SFBC by regulating forex in CHF.) As for everyone else, please conduct your due diligence and avoid poorly capitalized and/or unregulated firms for this is what can happen if you don’t.

In the last few weeks I have reported on two poorly capitalized/unregulated forex broker dealers who are currently holding customer funds hostage. Well, both firms appear to be in complete chaos judging from what’s going around on various bulletin boards.

We’ll start with NFA regulated One World Capital. Their troubles started earlier this year when the NFA inspected their books and discovered they were not meeting their financial requirements. The NFA said at the time, “One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."
http://www.nfa.futures.org/basicnet/...17&contrib=NFA

Since then One World has been losing staff and appears to be experiencing a severe cash crunch which has resulted in the halting of customer withdrawals, as detailed here:
http://www.goldenmoneytree.com/foru...r=asc&start=100

At the same time that my Inbox has been piling up with messages from distraught One World Capital customers now a report has come out at Forex Factory that One World is revoking a whole series of rollover interest payments on GBP/JPY trades as well:
http://www.forexfactory.com/showthr...700#post1576700

It came to my attention that 1World has resorted to dirty tactics in withholding profits/money from clients.

Sometime ago, 1World gave $40 or so per day in Swaps for LONG GBPJPY. Traders who made money on this have their profits and money withheld (indefinitely?). I also noticed about 6 weeks ago that swap rate for GBPCHF was zero for both long and short. This was already reported at StrategyBuilderFX forum. Was these swap rate an error or a deliberate Trap? After reading the horror stories, I suspect its a trap meant to screw traders.

How does this become a dirty ploy?

Assume you traded GBPJPY, made money in the process with 1World. Later they come to you saying, "Hey Mr Trader, you made money from a wrong swap rates and we are disqualifying them all". This includes the swaps you collected as well as the PIPS you made and to include ALL OTHER TRADES made after these trades; if these GBPJPY trades were not made, you wont have money to make further trades.". Remember, GBPJPY was soaring in June/July and these traders made money from it by going Long GBPJPY..

There are two possibilities being played here:
1. 1World did not hedge your trades with an upper tier broker (1World traded vs you); you made money and they now rescind those trades.
2. 1World hedged your trades with an upper tier broker. However, 1world now claims YOUR profits.
You dont earn swaps. you dont earn Pips. End of Story.
The trap is for traders to make positions on those pairs; if you did and after further trading (even with other pairs) made money, they will go to your account and "cancel" your profits claiming, these could not take place so there is no profit made.

In July I put out an alert to the FX Community about Dead Pool Member Nations Investments, LLC. Well, shortly there after the NFA went in and closed them down. Now it appears the CFTC has stepped in to collect their pound of flesh. Nations was hauled into court by the scruff of their neck by the Feds and a court receiver has now taken over the defunct firm. Have customers lost money? I'll keep everyone informed.
U.S. Commodity Futures Trading Commission Files Action Against Futures Commission Merchant Nations Investments, LLC, for Failure to Maintain the Minimum Amount of Net Capital Required by Federal Law

U.S. Commodity Futures Trading Commission Files Action Against Futures Commission Merchant Nations Investments, LLC, for Failure to Maintain the Minimum Amount of Net Capital Required by Federal Law

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in the U.S. District Court for the Southern District of Florida against Nations Investments, LLC (Nations) of Fort Lauderdale, Florida, a futures commission merchant (FCM) registered with the CFTC.

The complaint alleges violations of the minimum net capital requirements of the Commodity Exchange Act and Commission regulations. More specifically, according to the CFTC complaint, as of July 21, 2007, and perhaps earlier, Nations’ net capitalization was below the adjusted net capital required by the Act and a Commission regulation. As of July 20, 2007, the complaint charges, Nations’ adjusted net capitalization remained below the required adjusted net capital with Nations’ total liabilities equaling $5 million while its assets were less than $2 million.

On July 30, 2007, the Honorable Marcia G. Cooke, U.S. District Court Judge, issued a restraining order freezing the assets of Nations and prohibiting the defendant from destroying documents or denying CFTC staff access to books and records. The Court also froze the assets of relief defendants Sulaiman “Sal” Husain, a Director, Chief Financial Officer, and principal of Nations, and Sammy Joe Goldman, an owner and former principal of Nations. Husain and Goldman allegedly contributed to the undercapitalization—which ultimately rose to approximately $4.5 million—by withdrawing a total of $1 million from Nations’ accounts.

On August 7, 2007, the court approved the appointing a receiver to marshal the assets of Nations. In the ongoing action, the CFTC seeks an order of permanent injunction against the defendant, monetary penalties, and other relief.

The problem is your post, as always, includes some facts, and not all facts...

This company is an FCM and not FDM.
That´s why the action of CFTC.

If the company would be an FDM the CFTC would do nothing because Forex is outside of attributions of CFTC.

CFTC can only act in futures markets and against futures brokers due to federal law.

That´s why Forex is non-regulated market in the US and only the NFA could take some "actions".

The CFTC could accept or ban NFA new rules or proposals. But new rules or regulations of NFA would be expression of desire and not rules enforced by law.

The NFA could increase the margin requirements to whatever they want, 5M, 20M, 100 M, and only NFA members would be affected.

The NFA could ban a members an and what?
You would be banned from NFA and what?

This is a problem? off course not, you only lost NFA membership.

Still, you could start a Forex Brokerage Company without the NFA OK and be completely legal.
Meanwhile you can´t start a Futures Brokerage Company without the OK of CFTC.

The real and needed regulation is a modification of the federal law to include Forex Brokers and some kind of rules to avoid Brokers abuses due to non regulated market problem.

And this is what the healthy Forex brokers does not want.
And this is the big motive of this kind of "new rules".
To put in scene a show to keep out the real regulation interests, as some senators request.

To demonstrate that a close CFTC surveillance as they do with Futures Brokers is not needed because we can self regulate.

__________________

Elite Manual Trading | Portfolio | Calendar | Suggestions to improve the forum | My Blog

Remember: Signatures must have three lines as maximum

FX Street has put together a very comprehensive review of the NFA Capital Requirement Proposal providing a number of links to magazine articles, current net capital numbers and other tidbits. Worth a look here:

The Brokers (re) Evolution: NFA New Regulation

Wow, what a tittle. Looks good.

But the real revolution would start just when this "brokers" could explain why in the most liquid market we´re paying higher spreads than in most of illiquid markets.

Talks and articles of the most liquid market is written in a lot papers, including several books written by employees of this brokers.

Lat´s change a bit.
The Brokers (in) Evolution: NFA New Regulation

Bi dear.

__________________

Elite Manual Trading | Portfolio | Calendar | Suggestions to improve the forum | My Blog

Remember: Signatures must have three lines as maximum

I came across this excellent post about the lack of regulation in Switzerland, as confirmed by Swiss Regulators themselves. Be very wary of doing business with a broker in Switzerland until the market gets regulated over there.

Originally Posted by minter
I requested info regarding a FX Brokerage firm in SWITZERLAND.

The first reply is from SBFC (Swiss Federal Banking Commission) and the second reply is from MLCA (Money Laundering Controlling Authority) .I personally do not feel the SWISS regulators are not as proactive as the US side .What about UK 's FSA ? I will try to find out .

Dear Sir ,

For the time being, financial intermediaries providing foreign exchange trading are not subject to licensing by the SFBC, provided that they exclusively deal in foreign exchange on the spot market. It is however intended to amend the law to the effect that foreign exchange trading becomes a privilege of authorised banks.

Foreign Exchange dealers fall under the scope of the Anti-Money Laundering Act (AMLA). As such, they may be subject - unless they are a member of a recognised self regulatory body - to direct supervision by the AML Control Authority (Anti-Money Laundering Control Authority AMLCA) at the Swiss Federal Finance Administration, Christoffelgasse 5, 3003 Berne, phone +41 31 323 39 94, fax +41 31 323 52 61, www.gwg.admin.ch/e/index.htm. You may check this authority concerning forex brokers in Switzerland.

We hope that we were able to help you further.

Yours sincerely


Secretariat of the
SWISS FEDERAL BANKING COMMISSION


sig. Christina Bürgi sig. Simone Flach
Communication&Media Communication&Media

Schwanengasse 12
P.O. Box
CH-3001 Berne
Phone +41 31 322 60 69
Fax +41 31 322 69 26
mailto:simone.flach@ebk.admin.ch
Unbenanntes Dokument




CH-3003 Bern, FFA, AMLCA, bdu
By email

xxxxxxxxxx@yahoo.com

Sir ,
Our reference: 10-9/VER2007/wj

Bern, 31 August 2007

Re: List of regulated forex brokers in Switzerland

Dear Sir,

We acknowledge receipt of your inquiry of 30 August 2007 and have to inform you that we cannot supply you with the requested list. Forex companies are not under prudential supervision. No security for deposited funds is therefore given and no supervision of the quality of the services provided takes place.

Yours faithfully,

Anti-Money Laundering Control Authority
Brigitte Dumont Judith Wyss
Adm. Assistant Adm. assistant

While I'm on the subject of unregulated foreign firms I think it important that traders be aware of a firm called NorthFinance, which is not in any way regulated. And judging by the embarrassing grammatical errors prominently displayed on their website I'm guessing this is one rinky dink operation: About NorthFinance

Northfinance is apparently registered in Belize and does its operations out of Cyprus? This bizarre choice of geographic jurisdictions alone should dissuade anyone from seriously considering opening an account with these guys. But if you need something more here are two statements from two government bodies from the two respective jurisdictions Northfinance calls home:

Statement One: From the International Financial Services Commission of Belize
NEWS - International Financial Services Commission
International Financial Services Commission,
New Administration Building,
Belmopan,
Belize, C.A.
4 August 2006
WARNING NOTICE
NORTH FINANCE COMPANY LTD
It is notified for general information that NORTH FINANCE COMPANY LTD is not licensed by any competent authority in Belize to engage in foreign exchange transactions, or to engage in any other international financial services.
All persons are asked to take note and exercise caution.

GIAN C. GANDHI
DIRECTOR GENERAL
International Financial Services Commission

Statement Two: from SEC of Cyprus
Ç NÁÕÔÅÌÐÏÑÉÊÇ : E.K. Kýðñïõ: Ðñïåéäïðïßçóç ãéá ôç North Finance Company - 31/8/2007 11:06:00 ðì
Forex Factory - View Single Post - S.E.C. of Cyprus Warning for North Finance Ltd (taken from article) (Translation of Greek News Story)

With an announcement today, the SEC of Cyprus informed the investing public that North Finance Ltd:

-Has no License from the committee to provide investing services.

-Is not a bank registered in Cyprus, with a license from the Central Bank of Cyprus, permitting to provide investment or similar services.

-Is not established in Cyprus or provide services according to the Articles 24-30 of the law for Investment services companies."

When a government agency warns the trading public “to take note and exercise caution” about a firm it has singled out for being unregulated the trading public should indeed "take note and exercise caution." And while you're at it you should probably double check your neighborhood to see if NorthFinance has opened a new branch office in a van down by the river (YouTube - Matt Foley - Chris Farley - Saturday Night Live) now that the firm has been called out in Belize, Cyprus and who knows where next...

--------------------------------------------------------------------------------

The CFTC has just released the latest Adjusted Net Capital Numbers.
http://www.cftc.gov/marketreports/fi...fcms/index.htm

Now that the NFA has officially raised the minimum capital requirement to $5 million (http://www.nfa.futures.org/news/news...ticleID=194 2) these numbers are more important than ever so pay close attention everyone.

Poorly Capitalized Firms
Advanced Markets ($1,042,000)
American National Trading Corp (Merged with PFG)
Bacera Corporation (Shutdown!)
Cal Financial Corporation (Shutdown!)
Direct Forex ($1,117,000)
Easy Forex ($4,731,000)
E FX Options ($3,342,000)
Forex Club ($3,715,000)
FiniFX (Not Accepting New Customers)
Forward Forex (Shutdown!)
FX Option1 Inc (Shutdown!)
GFS Futures & Forex ($3,259,000)
Hamilton Williams ($1,004,000)
MB Trading ($2,393,000)
Nations Investments (Shutdown!)
One World Capital ($1,078,000)
Performance Capital International (Vanished)
Royal Forex Trading (Merged with IKON)
SNC Investments ($1,130,000)
Solid Gold Financial ($1,955,000)
Spencer Financial (Shutdown!)
Trend Commodities (Shutdown!)
United Global Markets (Shutdown!)
Worldwide Clearing (Shutdown!)
Wall Street Derivatives ($1,220,000)

Unregulated Firms (Buyer Beware)
FXDD (?)
GCI (?)
WestCapFX (?)
ACM (?)
MIG (?)
DukasCopy (?)
GFX Group (Forex.CH) (?)
Crown Forex (?)
Krusty's Currency Trading (?)
Tradex Swiss AG (Shutdown!)
NorthFinance (?)

We have just about reached the time for choosing. The brokers in the Dead Pool have known about the NFA’s plans to increase capital requirements for some time now. And yet most have not made much of an effort to increase their reported adjusted net capital (with the exception of Money Garden who just raised the reported capital to $5 million. As a result they have been removed from the pool.)

That’s a major red flag in my book. As such I will continue my dispatches on the Dead Pool and warn traders to avoid these firms until they show they can meet the new capital requirement passed by the NFA and awaiting approval by the CFTC.

One final note, I have included Swiss brokers in the “Unregulated Firms Buyer Beware” list. I have two words for anyone considering opening an account with an unregulated Swiss broker “Tradex Swiss.” Don’t make the same mistake the poor traders at Tradex Swiss AG made and trade with an unlicensed broker that is unaccountable to anyone because should the firm get into trouble NO ONE is going to help you get your money back.