NFA Forex Dealer Dead Pool

[forex scholar]

Originally Posted by scorpion

I think those got to do more with fraud, not minimum capital requirement, not the size of firm. Records are expected to be accurate, not using some kind of creative accounting to lie the financial situation. The best example is Refco which went bankrupt with $4,000,000,000 capital. Number says nothing, because they hid the same amount of debt under our noses.

True, money isn't everything. But at least its a starting point. The NFA cited AMI specifically with "failure to maintain required adjusted net capital." You can see this by looking at the CFTC reports which show AMI had been on the bubble for many months. Using that logic it isn't hard to see some of the other dead forex firms walking suffering the exact same fate. So numbers do mean something. Even the NFA says in its statement that the vast majority of regulatory problems come from smaller, undercapitalized firms which is precisely why they want to raise capital requirements. These two cases provide further evidence of that.

[forex scholar]

As I continue to update the dead forex firms walking list I'm amazed how many people think fraud and undercapitalization are completely separate issues. Often times they are not. The reason is quite simple: firms that are committing fraud are not known for having legible books. And Vice versa. Firms that have a hard time maintaining their capital requirements will often cut corners and commit fraud to keep their firms from going under. Finally, smaller firms simply don't have the money to maintain the kind of large legal and compliance staffs necessary to keep up with the battery of regulations being issued by the NFA and CFTC. And of course some firms are just plain incompetent. All these factors have come to a head with Forex Dealer Dead Pool Member One World Capital, who is now in serious trouble with regulators.

To see the full report on One World's misdeeds you can click on the NFA's report yourself: http://www.nfa.futures.org/BasicNet/...px?seqnum=1190

I have highlighted some of the worst allegations below. After reading through them I think you'll understand why One World is on the dead firm's walking list and why that should be serious cause for concern for anyone who has an account with them or any firm like them.

"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."

"The firm was unable to properly account for its liabilities to its forex customers." (Insert appropriate jaw dropping sound. This is the text book definition of a firm destined to go bankrupt.)

"In addition, NFA's audit found that One World and Walsh [Principal] provided false and misleading information to NFA auditors concerning an individual names Charles Martin and his role at One World. Walsh said Martin had no involvement in the firm. However, NFA subsequently learned that Walsh's claim was untrue and that Martin was, in fact, heavily involved in the operations of One World and solicited customers on its behalf." (Who is Charles Martin you ask? The NFA states Martin was turned down to be a principal before because of a "felony drug conviction and a misdemeanor theft conviction.")

It goes on and on, misleading promotional materials, outright lies to regulators, failure to report capital and maintain any semblance of book keeping standards. In 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?

[tobs]

I would appreciate if someone could keep posting any new news on One World Capital Group. Thanks. (ie. the consequences for OneWorld by NFA)
...other than the NFA website, how else can I stay updated on their future?

[cochise]

thankyou for the info regarding rogue brokers..... btw I use Xpresstrade forex, who manages this brokerage, and are they ok?

[forex scholar]

Originally Posted by cochise

thankyou for the info regarding rogue brokers..... btw I use Xpresstrade forex, who manages this brokerage, and are they ok?

XPress Trade has a solid reputation. They are owned by ADM, one of the largest futures firms in the world. They are in the clear.

[EFX_justin]

From Phil Davis at NonDealingDesk.com about Forexscholar and his possible motives.....

"It appears Chris's suspicion regarding Forexscholar's original posting declaring all but a small handfull of well capitalized market makers are destined to close their doors may be more than a suspicion. I spent a hour or so this morning doing a little research and discovered the Forexscholar lives just 5.4 miles from FXCM's downtown Manhattan offices.

Considering the distribution of the world's population, I'm hard pressed to think that this is just a mere coincidence. If, in fact, Forexscholar does work for FXCM it shows how low the company will stoop to exclude real competition in the marketplace. As Chris points out, the fact that Forexscholar put MBTrading/EFX name in the title of each of the forum postings only shows that ECN (non-dealing desk) trading is a real threat to the market maker business model.

Regarding capitalization requirements, anyone who knows anything about business knows that no properly managed company deposits phenomenally more than it has to deposit in an account that generates a nominal rate of return unless it has a good reason to do so. I would suggest that the well capitalized FCMs cited in Forexscholar's original post show those high balances for one reason and one reason only - it makes the look stronger than the little guy.

In FXCM's case, (IMHO) the only reason they show the biggest account is that they're using that to persuade traders that they're the best capitalized FCM in the business. Well, they ought to be. They've been screwing clients worldwide since 2001 and now want to change the rules of the game - not to protect the trader mind you but to insulate themselves from legitimate competition.

Any good financial planner will tell you that a balanced investment portfolio will include CDs and other time deposits but not to the exclusion of other asset classes. My guess is that the $50M they show is chump change considering the revenues they generate pulling off 2 pips per trade on the 90,000 traders they have in their camp. In 2005 they reported $154M. If that figure is accurate it's not a stretch to think that they currently have at least $200M in their political war chest considering the fact that they were willing to pay upwards of $110M to buy the now defunct Refco client list.

There's certainly no concern on my part that FXCM is going to go under unless, of course, the NFA decides to shut them down for some other reason. I'm not concerned about MBTrading/EFX either. They are but one of a small number of FCMs offering an alternative to the traditional bucket shop and push comes to shove, if they need to meet a higher cap requirement, I'm confident they'll find a way to make that happen. Their business model is not only an ethical one, it's a viable one that's obviously scaring the beJesus out of FXCM. Otherwise, FXCM wouldn't be encouraging its minions to create a fear campaign to drive MBTrading/EFX and others out of the business.

Again, it's hard for me to believe that Forexscholoar isn't in the employ of FXCM so members might want to take what he/she had to say with a big block of salt."

Phil Davis - The NDD Forum - Savvy Traders Want to Know - View Single Post - EFX/MB Trading Going Under?

[forex scholar]

Another day, another small forex broker dealer shuttered. But before we start throwing dirt on the coffin of forward forex let's take a peak inside and perform an autopsy on the cadaver. For some its old news but for those concerned about the fragile state of the forex industry I think a proper examination is in order. For starters, why and how did this firm get shut down by regulators?

Forward Forex was granted a NFA license in January of 2006.
http://www.nfa.futures.org/BasicNet/Details.aspx?entityid=0362887

On June 18, 2007, the NFA began its examination of Forward Forex and met its CEO, Onelio Manuel Murias. Murias stuck around for an hour after the NFA arrived and then apparently slipped out the back door. He has not been seen since. That's right. As soon as the regulators showed up at his door to look at his books the CEO of the company fled! It's like an episode of "To Catch a Predator" where Chris Hansen breaks out the cameras and the perps go running. So the NFA goes over and speaks with another AP/Principal of the firm, Marshall David Wertheim. Wertheim then tells the NFA that he didn't even know he was an Associated Person and just entered trades in the dealing room. And this guy was legally listed as an AP of the firm?! The rest of the audit consists of the NFA desperately trying to get basic book keeping information only to be told by clueless employees that "we know nothing." Finally Murias' lawyer followed up with the NFA and after a round of Monty Pythonesque negotiating conclude that Murias will not be responding to queries. Hard to believe right? See it all for yourself:
http://www.nfa.futures.org/BasicNet/CaseDocument.aspx?seqnum=1269

This goes right to the heart of what I have been saying these past few weeks. The National Futures Association has been inundated with this kind of activity amongst smaller, undercapitalized broker dealers (for the record Forward Forex had only $1.8 million according to the latest CFTC report.) When you don't have any capital you skimp on things like, oh, well, accountants, compliance staff, Associated Persons... This company was a complete farce. But if you are an ordinary trader how can you really tell? Before this scandal broke they were registered with the NFA and were meeting their minimum capital requirements. I'm sure they had some smooth talking salesmen spinning stories about how well regulated they were. So from the outside it looked ok, right?

Wrong. This is why the NFA is dramatically raising capital requirements. They are tired of dealing with these flimsy, undercapitalized firms. The very fact that the NFA is raising capital requirements should tell you that they have very little confidence in firms with net capital below $5 million. This isn't my opinion. This is the NFA's own opinion. And if a regulator thinks that then the average trader needs to think long and hard before putting their hard earned money in the bank accounts of any of the dead forex firms walking.

One last point. It has been said by some that after the NFA decides to raise capital requirements that there will be an orderly process for unwinding the smaller brokers who can't make the cut. Really? What's to stop the Murias' of the world from bolting with the company's funds and fleeing the state or country once they know the jig is up? The NFA couldn't even get the CEO of forward forex to answer some simple auditing questions and they're going to be able to keep some of these bucket shops out there from fleeing with customer assets? This whole Capitalization issue has the potential to be a real train wreck. So do yourself a favor and keep a sharp eye out on the dead forex firms walking.

P.S. To those firms on the dead forex firms walking list just put up the money now. Why put your customers through the agony of not knowing whether or not your firm is going to make the cut? As for the attacks against me and bizarre cyber stalking of me by EFX I suggest you guys spend your time raising enough money to stay in business rather than personally attacking me. And no, I don't work for FXCM. But if they want to cut me a cheque I'll be glad to accept it.

[Mei_lina999]

Not to be raining on everyone's parade after this long discussion of who is a solid and weak firms out there, but DOESN'T ANYONE REMEMBER REFCO????? The matter of all this working capital doesn't mean anything b/c even a well reputable institution like Refco that had networkings all over the world can take down all the investor confidence and we all still wind up being screwed. Until someone has some kind of protection bond like SIPC/FDIC for forex firms, the everyday investor is screwed if the firm decides to become bankrupt.

[forex scholar]

Having put myself in a good mood chuckling over the antics of Forward Forex I have decided to exhume some other FX broker dealer corpses, all for the benefit of the general trading public of course. The point? To emphasize why regulators are so concerned about firms that are undercapitalized.

The term "Maggot Mile" (http://www.forbes.com/forbes/1985/0520/038_print.html) refers to a stretch of land running from Boca Raton to Miami, Florida. Within these geographic boundaries lies one of the greatest concentrations of wealth in the world (held by American retirees.) And preying on these often naive denizens are thousands upon thousands of crooks, criminals, crackpots and con-men. Forex happens to be the financial instrument of choice at the moment for these petty thieves in suits. Back in the 1980's these same hucksters were peddling "oil lease scams" and in the 1990's during the big stock boom they peddled bogus internet stocks. The actual financial instrument being sold is of little consequence to these crooks out on the hustings since the instruments can be interchanged with whatever the latest marketplace fad happens to be. The main point is that regardless of whatever the huckster happens to be selling it is guaranteed to make the victim millions of dollars. It's the oldest sales pitch in the book.

Which brings us to our first slimy customer:Worldwide Commodity Corp in Ft. Lauderdale.
http://www.nfa.futures.org/BasicNet/Details.aspx?entityid=0291471

The owner of Worldwide was one Steven Labell. A quick look at Labell's resume should have sent the average investor screaming in terror. Labell has worked for one crooked operation after another. The firms Labell has been associated with showcase a rogue's gallery of compliance outlaws:
http://www.nfa.futures.org/BasicNet/Details.aspx?entityid=0189993&rn=Y

JCC INC (License Revoked in 1994 after massive commodities Fraud)
FSG International Inc (License forfeited in 2003 after being sanctioned for Fraud)
Financial Services Group Inc (License revoked in 1987 after massive commodities Fraud)
South Coast Commodities Inc (License revoked in 2007 after massive commodities Fraud)
Concorde Trading Group Inc (License revoked in 2002 after massive commodities Fraud)

While Labell was not guilty of every trespass at these firms clearly the apple didn't fall far from the tree in this instance. Nor, surprisingly, did it stop Worldwide from getting their license which they got on November 24, 2003. Fresh with a license what did Steven Labell do as a newly minted master of the universe? Why he went around selling Forex options promising would be suckers that they couldn't lose money betting on the war in Iraq… Add war profiteer to Labell's dubious list of lifetime accomplishments. By June of 2004 the CFTC had hauled Labell and his cronies into court to answer for the fact that over 200 customers had lost nearly $1.8 million betting away their life savings.
http://www.cftc.gov/opa/enf04/opa4944-04.htm

So what was the court’s verdict? “The order holds Labell and WWF (Worldwide Forex) jointly and severally liable to pay WWF's customers restitution in the following amounts: WWF $3.1 million and Labell $1.5 million. The order also imposes civil monetary penalties of $126,000 against Labell and $3.1 million against WWF. Finally, the order permanently prohibits defendants from engaging, directly or indirectly, in any commodity-related activity.”
http://www.cftc.gov/opa/enf07/opa5341-07.htm

End of story right? Not in the U.S. domestic retail forex industry where the shysters rise from the grave like the flesh eating zombies from 28 days later. Nope, what really makes this story juicy is the fact that refugees from Worldwide apparently migrated over to another firm, a dead forex firm walking, by the name of Nations Investments LLC. ($1,699,000 in net capital).
http://www.nfa.futures.org/BasicNet/Details.aspx?entityid=0358507&rn=Y

In fact, Nations even has the same address as did Worldwide!

1700 NW 64TH ST. SUITE 100
FT. LAUDERDALE, FL 33309

Anyone 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, I’m going long on Nations going under. And I ain’t worried about a margin call…

[OldFool]

Sure starting to look like a smear campaign by IFX, I’ve see this same post on a number of forums,
The authors of these topics are newly joined to all post,
IBFX has a team of professional posters/blogers
IBFX just received a cap injection that would leave them on the good side of this theory
IBFX is not named once, very strange...

Bigger does not always mean better, Rifco, Enron, just to name a few,

These E-forums have started become rubbish spillers when you allow this trash to be placed without recourse, people making these statements should be able to be accountable legally