I have spent a lot of time discussing the issue of forex fraud and how this has been one of the motivating factors driving the regulators' desire to raise capital requirements. But the issue of broker dealer insolvency is in many respects more pressing. The failure rate for firms with capital below $5 million is shockingly high. And why is that? Because too many people think running a forex broker dealer is as easy as running a bagel shop. But this next three part series on the demise of Forefront Investments (aka CFG) is evidence of how difficult it is to run a forex brokerage and why as a result of CFG’s collapse the NFA has an even stronger case to raise capital requirements.
I first became interested in the CFG case when an attorney posted this thread at Forex Factory:
(
CFG Trader/Snellgrove) asking former customers of CFG to contact him if they were still owed money. Still owed money? That piqued my curiosity. And so I began digging through the wreckage of CFG. Here is what I discovered:
CFG got its license in November of 2003. But its owner, Don Snellgrove, founded the company in 1998. (
Concorde Forex Group, Inc. : Henrico County, Virginia)
Originally the firm was in the forex training business. Essentially, for a fee, CFG would assign traders a mentor whose job it would be to teach “the forex” to rookie traders. While some customers complained about the ineffectiveness of the training (
Rip Off Report: CFG - Concorde - Concorde Forex Group - Concorde Financial Group - Don Snellgrove Absolute GARBAGE Total failure of me and many others Richmond Virginia) there are no indications that CFG was involved in any fraudulent activities. Indeed, Snellgrove had a reputation for being a very religious man and is quoted on his own website as saying, “We sincerely want people to succeed! Galatians 5:1 in the Bible, states that one should not be under bondage. 99% of the people who talk with me are under the bondage of debt. The Forex market is the largest legal cash flow industry in the world and a potential vehicle to achieve success by just about anyone and thus move out of bondage.” (
CFGNews - Page: 8 of 11)
Unfortunately, Snellgrove’s decision to turn his training business into a full fledged forex broker dealer would not only leave his customers still under the bondage of debt, but transform them into the Gimp from Pulp Fiction after the firm went under and their accounts were frozen.
But before going there it is important to review Snellgrove’s career to date. He was a good and moral man, he had a clean regulatory record, his company was fairly transparent as he had an open door policy with all his customers at his rather large office in Virginia, and he had been in the business since the late nineties. But there was one missing ingredient in this forex broker dealer cake: Snellgrove was poorly capitalized. And that’s why the firm went under. More to come…
Tomorrow- Part II “The Collapse of CFG”