The Saviorâs Greatest Hits- Part I It has been one year since the Savior started posting about the misdeeds and misadventures of the undercapitalized and the criminally minded in the retail foreign exchange world. To mark that anniversary here is a rundown of the top stories from a year of woe and sloth in retail forex. Cue up the Benny Hill Music⦠1) One World Capital Blows Up Without question this former forex dealer is the poster child of this thread. In July of 2007 I reported on One Worldâs shoddy book keeping as exposed by the NFA. I closed that post with this prediction: âIn short, One World is a classic Dead Forex Firm walking. Firms like One World are the reason the NFA is going to raise capital requirements. And when they do, does anyone honestly believe the One World's of the world will survive?â http://www.fxstreet.com/forum/showpost.php?p=5102&postcount=6 In August I did a follow up report titled âOne World Forex with One Foot in the Graveâ detailing the many complaints traders were making about One World Capital, in particular the problem customers were having withdrawing funds. These reports coincided with information I was being fed that One World was in dire straits and that their sales staff had resigned en masse. http://www.fxstreet.com/forum/showpost.php?p=5976&postcount=39 In September the news grew worse as customers confirmed to me they were having great difficulty getting money out. http://www.fxstreet.com/forum/showpost.php?p=6308&postcount=51 Finally, the firm slipped beneath the waves in December just as the new capital requirements were kicking in. http://www.fxstreet.com/forum/showpost.php?p=8337&postcount=92 The final death blow came on December 13th after the CFTC raided the joint and put them out of business for good. http://www.fxstreet.com/forum/showpost.php?p=8597&postcount=106 http://www.fxstreet.com/forum/showpost.php?p=8632&postcount=108 2) The Forward Forex Follies Of the many firms that went belly up in 07â perhaps known was more humorous to observe than NFA member Forward Forex. These two posts are must reads. Upon having the NFA enter his companyâs office the CEO of the firm, Onelio Manuel Murias, fled the premises likes a scalded hound. The firm was shut down shortly after. http://www.fxstreet.com/forum/showpost.php?p=5224&postcount=8 Digging through wreckage of the firm one finds a whole cast of crazy characters right out of One Flew Over the Cuckooâs Nest. Here is a typical day in the life of a Forward Forex salesman: http://www.fxstreet.com/forum/showpost.php?p=5303&postcount=11 âAnd on and on it goes. Customers are pressured into sending in their 401k money or to take out second mortgages, which are then promptly flushed down the drain in worthless options contracts. Sales agents are described as harassing, berating and screaming at customers to send in money. One "Customer Service" representative tells a distraught customer who is losing his shirt that their sales agent (who else but the notorious Blauch) can't be reached because he has "had a heart attack" and then finishes the conversation by saying "sorry, but this is the chance you took." And my personal favorite, "sales agents throwing chairs across the room in fits of rage.â Indeed, that is the chance you take with poorly capitalized firms. 3) Strolling through Maggot Mile This story highlighted the loathsome villainy of Worldwide Clearing, one of the many seedy bucket shops populating South Florida. I also pointed out that another NFA registered forex dealer, Nations LLC, was inhabiting the same address and made the following prediction, âAnyone want to make odds on how long it will be before Nations gets shuttered? Perhaps the folks over at Intrade can add a dead forex firms expiration date contract to their prediction market. If so, Iâm going long on Nations going under. And I ainât worried about a margin callâ¦â http://www.fxstreet.com/forum/showpost.php?p=5243&postcount=9 A week later that is exactly what happened. 4) Nations LLC Bites the Dust The collapse of Nations was entirely predictable for anyone who did a cursory background check on them. Cause of death? Undercapitalization. Pure and simple. http://www.fxstreet.com/forum/showpost.php?p=5325&postcount=12 http://www.fxstreet.com/forum/showpost.php?p=5349&postcount=14 http://www.fxstreet.com/forum/showpost.php?p=6359&postcount=53 http://www.fxstreet.com/forum/showpost.php?p=6669&postcount=59 5) Underwater Udo This self described âscuba rogueâ was sent to the clink for using customer funds to buy himself cars put his wife through school and go deep sea diving all the while sending his customers statements telling them they were making a killing when in reality he was spending their money to fund his own lavish lifestyle. http://www.fxstreet.com/forum/showpost.php?p=5713&postcount=27 6) Switzerlandâs Swiss Cheese Regulation Meanwhile in Switzerland gangs of scheming thieves were wreaking havoc in what had become the most notorious forex backwater on earth. I was quick to expose the lie put forth by Swiss forex dealers that their membership in anti-money laundering associations like ARIF was regulation comparable with the FSA or NFA for example. http://www.fxstreet.com/forum/showpost.php?p=5950&postcount=38 Following that came some muckraking stories on Tradex Swiss AG. The Tradex story made national headlines as well. http://www.fxstreet.com/forum/showpost.php?p=6308&postcount=51 http://www.fxstreet.com/forum/showpost.php?p=6641&postcount=58 http://www.fxstreet.com/forum/showpost.php?p=7049&postcount=70 Following the Tradex debacle Swiss authorities had to shut down another bucket shop, Aleccoh FX, which was being run by some shady character at the Forex TSD bulletin board who hides behind a George Soros avatar. http://www.fxstreet.com/forum/showpost.php?p=11745&postcount=132 http://www.fxstreet.com/forum/showpost.php?p=11766&postcount=133 Finally, the stench of Switzerlandâs rotting forex broker dealer corpses became so pungent the Government stepped in and demanded everyone get a banking license pronto: http://www.fxstreet.com/forum/showpost.php?p=8632&postcount=108 Coming Tomorrow- Part II of the Saviorâs Greatest Hits
The Saviorâs Greatest Hits- Volume II You didnât think the Savior would forget such criminal masterminds as Robert Gray or overlook the smooth talking shysters hustling and bamboozling the public at places such as Easy Forex or FX Open did you? On with the show⦠1) Forex Bastardâs Babe Bound for Big House The sordid tale of Forex Bastard (aka Dmitri Chavkerov) and his mistress from Russia captivated the forex world after it was learned she actually got her golden ticket to America in a sham marriage that the Bastard himself presided over! http://www.fxstreet.com/forum/showpost.php?p=12511&postcount=159 2) Dirty Rotten Scoundrel The collapse of Forex Liquidity is perhaps the greatest con job ever committed in retail forex. It involved the forging of a fake bond valued at almost $40 million. This fake bond was used by FXLQ to fulfill their net capital requirement and for months they got away with it. Eventually the hoax was uncovered and FXLQ was shuttered by regulators and forced into bankruptcy: http://www.fxstreet.com/forum/showpost.php?p=8382&postcount=95 http://www.fxstreet.com/forum/showpost.php?p=8491&postcount=102 http://www.fxstreet.com/forum/showpost.php?p=8491&postcount=109 But digging deeper one finds that Robert Gray has a long history of malfeasance in the forex industry. http://www.fxstreet.com/forum/showpost.php?p=11817&postcount=134 http://www.fxstreet.com/forum/showpost.php?p=11817&postcount=137 He has worked at over a half dozen different forex dealers just in this decade alone hopping from firm to firm (sometimes stealing the previous firmâs clients on his way out the door) always hustling, always scheming. Today Gray finds himself in deep legal manure but heâll get no help from the forex community that has come to loathe him as this Irish ballad can attest to: 3) The Running Man These posts detailed the antics of Mr. Ryan Nettles who cut a Genghis Khan like swath through the forex industry. His war with Craig Karlis of Tradex Swiss AG fame became grist for the forex tabloids. He then treated the NFA with equal contempt when another one of his firms (Tradeco) went down the toilet in the summer of 2007. Last he was heard hawking his Weekend at Bernieâs like dead corpse of a company, Finex, to the poor sods at Varengold. Someone sign this man up for the 400 meter relay at the Olympics! http://www.fxstreet.com/forum/showpost.php?p=8404&postcount=99 http://www.fxstreet.com/forum/showpost.php?p=8405&postcount=100 4) Metatrader Misery âWhat happens when a business deal goes bad? You get bitterness, recriminations, machinations and vows to get even. This appears to be what happened after Poltek FX and FX Open parted company.â Such is the opening to two investigative pieces I did on the broker war between Poltek FX and FX Open. This bloody civil war spilled over into numerous bulletin boards as each side released damaging information about the other in an attempt to discredit one another. In the end they both wound up deeply discredited themselves. These posts also detailed how risky some of these small metatrader brokers are. There isnât a shred of transparency with these firms and it is impossible to do any kind of background check on them because they are not regulated and wonât even tell you where they are based or who owns the company. It is a leap into the dark that too many traders have been eager to take. http://www.fxstreet.com/forum/showpost.php?p=11956&postcount=140 http://www.fxstreet.com/forum/showpost.php?p=11956&postcount=141 5) Shark Hunting in the Caribbean This post told the story of Mitch Vazquez and the gang at GCI who were closed down by the CFTC in 2002 only to emerge from the ocean like Jaws himself and start circling the waters off the coast of Belize, in defiance of the very court settlement Vazquez had apparently agreed to. Oh by the way this deadly man-eating squalus is also known to inhabit the lakes of Switzerland in the guise of Forex.CH. Swimmers beware. http://www.fxstreet.com/forum/showpost.php?p=12145&postcount=145 6) Easy Forex Exposed Back in November of 2007 the Israeli media was running stories on the sales practices of Easy Forex. Quoted in one report was an Easy Forex solicitor who said âI had this evil grin on my face one day, when a client lost $35,000 in a quarter of an hour. A guy gets wiped out - I get my commission. A guy comes up a winner and turns a profit - I pay." http://www.fxstreet.com/forum/showpost.php?p=8043&postcount=87 A lawsuit is pending in an Israeli court but when television crews are quoting former salesmen taking glee in their clients losing their shirts the trading public shouldnât be too worried regarding the judgeâs ruling. Stay away from these guys! Last month some ex-traders put even more heat on Easy Forex claiming all sorts of irregularities including tales about Easy Forexâs âNet Deposit Method.â A must read for anyone concerned about the dealing and sales methods of market makers. http://www.fxstreet.com/forum/showpost.php?p=13168&postcount=174 Two Volumes down, with more to come Iâm sure. There is still a lot of mucking out to do in the FX Barnyard and there is still a lot of time to pass until the CFTC comes out with its new rules. In short, there is still much to be written. And so it shall be.
Breaking News: NFA Hits I Trade FX with anti-Money Laundering Charges The NFA has just blown the lid off I Trade FXâs finances. I Trade FX has had a wild financial history going from $6,500,000 in adjusted net capital in March of 2007 to $-3,000,000 in April of 2007 then up to an astonishing $34,000,000 by December of that same year. Last month the firm took a huge net capital drop down to $16,000,000. Who knows what it will be next month. But judging from this just released NFA BCC action against the firm we are beginning to get an inkling why the firmâs numbers are all over the place: http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0367140&case=08BCC00014&contrib=NFA First the NFA reveals this juicy little tidbit about I Trade FXâs customer base: For a firm that saw its net capital grow from a little over $1,000,000 in 2007 to $34,000,000 by the end of the year that is a TINY customer base. Only 3,000 accounts? Only NINE accounts with equity of over 50k? The firm is barely doing any business. So how did their capital figure grow to such a huge amount? Answer per the NFA: David Smith Who is David Smith? Well he is famous in Jamaica for starting a couple currency trading clubs (Olint Corporation & TCI FX Traders) that racked up huge profits. Only problem for Mr. Smith was that he neglected to register with Jamaican authorities and in 2006 they swooped in and raided his place of business seizing everything in sight. The raid was upheld by the Jamaican Supreme Court last year. The Government has yet to charge Smith with any crime and in the meantime he has shuffled on over to the Turks and Caicos Islands to await the outcome of the investigation: http://www.jamaicaobserver.com/maga...TH_ON_THE_BUSINESS_OF_CURRENCIES_TRADING_.asp But while he was awaiting his fate in Turks and Caicos he continued to operate his Olint and TCI accounts at I Trade FX. And this is what has so concerned the NFA. In 2007. when NFA got wind of the Cease and Desist order against Smith they asked I Trade FX to turn over Smithâs bank records since he was a principal in the firm. I Trade FX could not get Smith to comply and so they dumped him as a principal. But the NFA didnât let the matter die there. They began digging through Smithâs trading activity at I Trade FX (particularly his Olint and TCI accounts). Examples of Smithâs activity cited by NFA included: Several more examples like this are cited in the NFA report including this one: What the NFA is charging I Trade FX with is failure to notify NFA of suspicious activities, not money laundering itself. But it does raise very troubling question about the people I Trade FX is associating with. I Trade FX responded in a radio interview in which they directly contradicted some of the NFAâs charges (Smith was only a minority shareholder according to I Trade FX.) But in one eye popping segment of the interview David Smith and I Trade are busted by the interviewer on the question of âwhy wouldnât David Smith give the NFA his bank records?â I Trade FX claimed Smithâs lawyers felt NFA had no jurisdiction to ask for Smithâs bank records and so Smith declined. Ten minutes later David Smith gets on the phone and states the NFA never asked him for his bank records and that I Trade gave NFA that response because Mr. Smith needed more time to put his records in order. Smith quickly back tracks when he gets called out on his original answer and in general gave a less than stellar performance. This radio interview was just conducted at nationwidenewsnetwork.com and is a must listen: http://boomp3.com/listen/byus88nrr_h/dsm-interview_provider-investforlife This is big news in Jamaica even if most people in the United States have no idea who David Smith and I Trade FX are. At the end of the interview the interviewer asks David Smith why customers of Olint arenât getting paid their monthly returns. Smith has no answer and after an agonizingly long pause throws out that his âbrokersâ wonât give him the funds and he doesnât know why. The credibility of David Smith crumbles by the hour and his constant references to himself in the third person in this interview only damage him further. It may be that we have only touched the tip of the iceberg with this story so stay tuned as this investigation moves forward.
David Smith: Messiah or Huckster? Google âDavid Smithâ and âforexâ and you come up with hundreds of results. The man is the George Soros of Jamaica and reading through some of the material on him either you love him or you hate him. On the Internet you can find plenty of testimonials from customers who back up his claims that his trading club âOlinâ was routinely getting 10% monthly returns. But I give you this blog post from âAll Messed Up â My Lifeâ to give you a front row seat at a David Smith love fest: http://www.normalontheoutside.com/?p=134 Such is the effect that Smith has on his followers. Indeed, below this blog post there are over 100 comments, many of them like this: So what got Olinter so riled up? Well, many of the people commenting claimed that Smith is merely operating a Ponzi scheme. In fact, the International Monetary Fund recommended that Jamaica close all its unregulated investment schemes due to the concern many bankers have about ponzi schemes in Jamaica. http://www.jamaicaobserver.com/news...UNREGULATED_INVESTMENT_SCHEMES__WARNS_IMF.asp This article that came out last week in the Jamaica Observer states there are 35 such known schemes in operation on the island today and that their collapse could wreak havoc on the island reminiscent of the Albanian Ponzi Scheme revolution of 1997: http://en.wikipedia.org/wiki/1997_unrest_in_Albania In fact, one major investment scheme has already been exposed in Jamaica, Cash Plus. http://www.jamaicaobserver.com/news...OS_HILL_AND_CO_ACCUSED_CHARGED_WITH_FRAUD.asp Only time will tell if David Smithâs Olint is a Ponzi scheme too. And if it is it could have far reaching consequences well outside the happy confines of Jamaica.
NFA Not Targeting David Smith The NFA has come out and clarified that it is not investigating any of the transactions in question by Olint or TCI. They are merely citing I Trade FX for not filing any anti-money laundering notices in regards to the transactions in question. Jamaican media is all over this one: http://www.radiojamaica.com/content/view/9731/26/
Can anyone tell me if it is legally allowed for FCMs to rebate their money managers for managed accounts besides the incentive fees that those are charging to their customers?
No one knows what the new or even the proposed rules will be and how they will affect current FCM/IB relationships or business models until their published later this year. The CFTC is a funny org, I wouldnât be surprised if they scud the whole retail FOREX industry under their jurisdiction
How Many Forex Accounts Does David Smith Have? David Smith is rumored to have over $1 billion in assets under management. As such he has money squirreled away all over the world. I Trade FX is just one of many brokers Smith has cash at. It is rumored that he has money at all the big FX brokers in the U.S. The folks over at investforlife.wordpress.com have been doing a great job covering the Olint story and today they printed an email from an anonymous source to Oanda asking them if they have any David Smith accounts and if so have they frozen them: http://investforlife.wordpress.com/2008/07/10/olintoandatruth/ Naturally, Oanda cannot comment on private customer information. But they state in their email responses that regulators can request customer accounts be frozen. Smith is stating that is why he canât give customers their money back. Olint customers are worried that Smith is playing the slippery eel and that he is using that as an excuse for non-payment. My hunch is that regulators are swarming all over David Smithâs accounts right now and he most likely is telling the truth. But that being said will there be enough money in all his accounts to pay back his customers? That remains to be seenâ¦
CFTC Net Capital Report Update The new net capital numbers are out. Here is the link to access the report: http://www.cftc.gov/stellent/groups/public/@financialdataforfcms/documents/file/fcmdata0508.pdf The following firms have net capital below $10 million Advanced Markets $5,017,000 Bacera $5,387,000 MG Financial $6,001,000 Forex Club $7,380,000 Hotspot $7,843,000 Friedberg Mercantile $8,167,000 CMC $8,426,000 Ikon $8,462,000 MB Trading $8,660,000 Easy Forex $8,662,000 IFX $9,141,000 In particular you will notice that three firms are far below the upcoming increase to $10 million. Advanced Markets, Bacera and Money Garden. In fact, they are struggling just to meet the current $5 million net capital requirement with Advanced Markets a scant $17,000 above the current law! That kind of capitalization does not inspire much confidence and traders really need to beware doing business with them. The following firms have net capital below $20 million GFS Forex $10,829,000 Alpari $11, 668,000 ODL $15,182,000 I Trade FX $15,828,000 FX Solutions $18,088,000 CMS Forex $19,306,000 The following firms have net capital above $20 million PFG $20,275,000 Interbank FX $22,980,000 Gain Capital $44,293,000 GFT Forex $58,304,000 FXCM $70,794,000 Oanda $164,256,000 As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new law.
Olint on Verge of Collapse The situation at Olint is deteriorating rapidly as David Smith has shuttered a local office in Jamaica that he says was the subject of a bomb threat while his fund suffers an apparent bank run. In a grim letter to shareholders Olint states: http://investforlife.wordpress.com/2008/07/14/olint-office-closed/ Jamaican News is keeping up with the story and Radio Jamaica states: http://www.radiojamaica.com/content/view/9930/26/ David Smith is spinning hard but regardless, it appears that Olint is doomed. Again the question is will there be enough money to go around or was this a Ponzi scheme all along? And if it was a Ponzi scheme did I Trade FX, where David Smith was once a leading principal, knowingly or unknowingly help facilitate it?