CFG Trader/Forefront Investments Corporation - NFA Emergency Action

Discussion in 'Forex Brokers' started by FXCM Rep 1, Mar 26, 2007.

  1. FXCM would like to inform anyone who has an account with CFG Trader (aka Forefront Investments Corporation) of the following press release.


    FXCM Makes Offer to Rescue 3,800 Forex Trading Accounts of CFG Trader:
    NFA and CFTC Currently Reviewing Offer


    March 26, 2007
    • [*]CFG Trader, a Richmond, VA foreign exchange trading company, was forced to liquidate all open trading positions by the NFA on March 21 of this year, because it failed to meet NFA’s capital requirements;
    • [*]Forex Capital Markets LLC (FXCM) has agreed to accept the CFG Trader accounts – representing approximately 3,800 individual traders, pending regulatory approval. CFTC and NFA approval are required in order for the agreement reached between CFG Trader and FXCM to be consummated;
    • [*]FXCM is prepared to contribute approximately $1 million dollars to make up the difference between the assets of CFG Trader and the funds owed to CFG clients due to under-capitalization, should the CFTC and NFA approve the transaction;
    • [*]Under the proposed agreement between CFG Trader and FXCM, no CFG client will lose money due to the under-capitalization of CFG Trader. If the NFA and CFTC do not approve the agreement, there is no certainty that CFG clients will receive 100% of their funds.

    These announcements were made by Drew Niv, CEO of Forex Capital Markets, the global currency trading firm.
    “After the NFA decided to suspend CFG Trader operations, we received several requests to protect their clients against loss,” said Niv.
    “FXCM is prepared to provide one million dollars in order to make the CFG clients whole. If the transfer goes through, all the account holders will have their funds intact,” said Niv.

    FXCM Calls For Higher Standards

    “Our strong balance sheet, which greatly exceeds NFA requirements, is enabling FXCM to put on the table an offer which may keep the 3,800 CFG traders from losing money. We hope the NFA and CFTC will enable us to protect these clients from substantial losses,” said Niv.

    “This incident points to the fact that there are still some companies in the forex industry that are inadequately capitalized. We think it is vitally important that all currency trading clients have full information regarding the financial strength of forex trading firms.”

    “We at FXCM have taken the major step of making our balance sheet public,” said Niv. “We challenge other firms in the industry to follow our lead.”

    FXCM recently released its financial details: The FXCM Group as of January 31, 2007, held over $120,660,927 In Capital (Assets Minus Liabilities) and $98, 657,018 In Operating Cash (Excludes Client Funds.) For more details on FXCM’s balance sheet, visit http://www.fxcm.com/company-profile.jsp.)

    # # # #

    FXCM Facts

    • [*]Forex Capital Markets LLC is the Largest Forex Dealer Member*
    • [*]More than 85,000 live accounts are traded via the FXCM platform
    • [*]Over $200 billion in notional volume is traded each month on the FXCM platform

    Registered with the CFTC as a Futures Commission Merchant, FXCM (Forex Capital Markets LLC) has received numerous awards from the investment community, including Best Currency Broker from Shares, Best Retail Foreign Exchange Platform from FX Week and Best Foreign Exchange Specialist from Technical Analysis of Stocks & Commodities. In addition to currency trading, FXCM offers educational courses on forex trading, and provides research through DailyFX.com.

    *As of September 2006, FXCM held in excess of $215 million in customer funds out of a total of over $770 million held by Forex Dealer Members. While there are approximately 31 active Forex Dealer Members with liabilities to customers of approximately $795 million, FXCM holds approximately 1 out of every 3 dollars of customer funds held by Forex Dealer Members.

    *Source: http://www.nfa.futures.org/news/newsProposedRule.asp?ArticleID=1704
    (FXCM is the FDM referenced in this NFA document as holding in excess of $215 million in customer funds.)

    # # # #

    Leveraged foreign exchange trading carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.
     
  2. NEW YORK (Dow Jones)--A retail foreign exchange trading company has had its
    assets frozen after failing to meet minimum net capital requirements, and its
    3,800 day-trader customers might have trouble getting their money back.
    The action by a U.S. District Court judge comes came after it was discovered
    that Forefront Investments Corporation, which also goes by the name CFG Trader,
    had liabilities of $8 million but assets of just $6.8 million. Rules require
    such firms to maintain assets of $1 million more than their liabilities.
    The Commodity Futures Trading Commission, a government watchdog, said Tuesday
    it filed an official complaint against the Richmond, Va.-based company,
    charging it with "undercapitalization by more than $2.2 million and
    record-keeping violations."
    The complaint seeks a "permanent injunction against the defendant, monetary
    penalties and other relief," said the CFTC, which monitors futures trading and
    retail forex markets and market participants.
    The U.S. District Court judge who froze Forefront's assets March 21 also
    prohibited it from destroying documents or denying CFTC staff access to books and records, the CFTC said in a statement.
    Paul Hayeck, associate director of enforcement at the CFTC, said about 3,800
    retail forex customers have accounts with Forefront. The CFTC is hoping that by
    freezing Forefront's assets, customers' investments may be protected, he said.
    Working alongside the CFTC on the case is the National Futures Association, a
    self-regulatory agency that also serves as a watchdog for U.S. futures trading.

    Larry Dyekman, the NFA's director of communications and Education, said that
    during the past month it repeatedly sought to reconcile the problems with
    Forefront, but without success.
    A document from the NFA posted on Forefront's Web site details those efforts,
    which began with an audit on March 5.
    According to the eight-page document, Forefront's accounting consultant,
    Richard Lani, said at one point that it would be "a fair statement to say that
    the firm does not know (its) financial status."
    Dyekman said the case highlights the dangers lurking for individual investors
    who decide to participate in retail foreign exchange trading.
    "It's a perfect example of what we've been telling people ... their funds (in
    spot retail forex trading) are not protected," Dyekman said.
    It wasn't clear how much of Forefront's $8 million in liabilities were owed
    directly to customers.

    No one was immediately available for comment at Forefront, which began
    operations in 2003. But a notice on the company's Web site Thursday said: "In
    the next 24 hours, CFG Trader (Forefront's retail name) will be making an
    announcement regarding the status" of clients' accounts.
    The number of retail foreign exchange firms has exploded to about 37 firms
    from three five years ago, the NFA's Dyekman said. The NFA is considering
    bumping up the minimal capital requirements to provide more protection to
    customers, but Dykeman urged investors to do their homework on forex trading
    companies before placing any investments.
    The NFA official said he could recall other instances of retail firms not
    meeting net capital requirements for a few days - the NFA performs weekly
    checks - but he said: "This is the first major case of a company being
    seriously undercapitalized" over an extended period of time.
    The NFA had ordered Forefront to liquidate all its open positions by March
    21.
     
  3. Chood

    Chood

    For customers of fx retailers, account withdrawal is overblown. It isn't a necessary functionality of a fx retailer's product suite.
     
  4. Chood

    Chood

    On top of that, loans made merely on a promise of repayment and without collateral are by definition risky, so this news hardly is unexpected.
     
  5. FXCM Comments on the CFG Trader Transaction

    • Yesterday the US District Court in Richmond, Virginia approved the transfer of the assets of Richmond-based CFG Trader, a forex trader, to a South Florida currency broker.
    • CFG was forced to suspend business on March 21, when the National Futures Association determined that CFG could not meet its capital requirements.
    • FXCM, headquartered in Wall Street, submitted its own bid for the assets of CFG on March 27, stipulating that it would contribute over $1 million to make sure the CFG trader-clients lost no money.
    Today, Drew Niv, CEO of FXCM, had the following comments.

    “We are pleased that the trading accounts have been successfully transferred. The client traders will hopefully lose no money because of CFG’s situation.”

    “Of course, we are disappointed that our own bid was not accepted. Our bid was designed to cover the gap between the assets and liabilities involving the customer funds, and to make sure that the trader customers didn’t lose any money. The receiver for CFG demanded additional funds for what were described as ‘other assets’ and for receivership fees.”

    “We had already spent more than a week in an exhaustive due diligence examination of the company, trying to make sense of a collection of financial records and transactions that were – to put it mildly – unusually assembled. That due diligence process convinced us that the price finally asked was in excess of the actual value of the CFG assets plus the extra receivership costs.”

    “I would add that while it is standard business practice in cases like this for the first credible bidder, sometimes called a “stalking horse”, to impose a 3% breakup fee for all the accounting work and for establishing a credible benchmark price, we did not. That fee would have had to come out of customer funds – the very funds we were trying to protect.”

    “So, although our bid was not accepted we are confident that we played a vital part in assuring the traders that their funds were safe. As the largest company in the retail forex industry, our being the first – and, for an extended period of time the only – bidder was instrumental in establishing a benchmark value for the CFG assets.”

    “Our purpose in making a formal bid was not only to add a few thousand trading accounts to FXCM. As the leading company in the forex industry we see it as our responsibility to the trading community and to the retail currency trading industry itself to ensure that traders’ funds are safe.”

    Forex Firms Invited to Join a Safety of Funds PAC

    “But as this case should make clear, it is not enough merely to bail out one bankrupt company. CFG was inadequately capitalized, and the NFA is to be commended for suspending them before things got worse for the company and especially for the traders.”

    “But we believe that it is vitally important that all currency trading clients have complete and verified information on the financial strength of forex trading firms. That is why FXCM has taken the major step of making our balance sheet public, and challenged other firms in the industry to follow our lead.” (See http://www.fxcm.com/news-release.jsp)


    “More importantly, FXCM is in the vanguard of the movement to convince the US Congress to pass legislation ensuring the funds of currency traders against the kind of problem represented by the CFG Trader case. In fact, we have even established a Political Action Committee to support and coordinate the actions of this Safety of Funds initiative, and we have convinced four other large FCMs to add their names to our petitions. We are urging every firm in our industry to join us in this effort.”

    # # # #

    FXCM Facts


    Forex Capital Markets LLC is the Largest Forex Dealer Member*

    More than 85,000 live accounts are traded via the FXCM platform

    Over $200 billion in notional volume is traded each month on the FXCM platform

    Registered with the CFTC as a Futures Commission Merchant, FXCM (Forex Capital Markets LLC) has received numerous awards from the investment community, including Best Currency Broker from Shares, Best Retail Foreign Exchange Platform from FX Week and Best Foreign Exchange Specialist from Technical Analysis of Stocks & Commodities. In addition to currency trading, FXCM offers educational courses on forex trading, and provides research through DailyFX.com.

    *As of September 2006, FXCM held in excess of $215 million in customer funds out of a total of over $770 million held by Forex Dealer Members. While there are approximately 31 active Forex Dealer Members with liabilities to customers of approximately $795 million, FXCM holds approximately 1 out of every 3 dollars of customer funds held by Forex Dealer Members.
    *Source:
    (FXCM is the FDM referenced in this NFA document as holding in excess of $215 million in customer funds.)

    # # # #


    Leveraged foreign exchange trading carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.
     
  6. BigGun

    BigGun

    CFGtrader , Forefront owners are ether buying I-Trade-FX or partnering with them, never the less they are still the same group of cronies just a new company name to fleas from!! One would need to be a complete nimrod to deal with associated with them again. Let's see, Coesfx closed down; spotfx closed down; CFGtrader Closed Down ill give I Trade FX tell summers end to bite the dust. Where's the NFA when we need them, allowing snakes like this group continue doing business.
     
  7. Obviously this person that commented has no idea and didn't research this at all... ITradeFX is a relatively new broker and has NO AFFILIATION with CFG. They went in and purchased the assets... Go to http://www.itradefx.com/press_release_cfg.htm and do some research before posting a comment... Just to let you know the legitimacy of iTradeFX, obviously the NFA allowed them to outbid FXCM!....
     
  8. they're even smaller than CFG was. i checked out how much excess capital they have on the CFTC's website and it's in the low 6 digits. they must have bought the accounts with borrowed money.

    not sure if going from one small firm to another small firm is necessarily in the clients' best interest but hey, that's how an auction market works...may the highest bidder win.

    good luck to those clients...hopefully, they won't find themselves in the same situation again in a few months (bankruptcy part 2).
     
  9. BigGun

    BigGun

    Obviously you know nothing about the company you work for, nothing new considering who your companies choosing to business with!!

    Who do you think your fooling, itrade beat fxcm buyout offer, come-On LOL the owners of Coesfx, spotfx, forefront, CFGtrader is defiantly silently buying into itrade to keep fleecing what’s left of their clients..
     
    #10     Apr 25, 2007