This is going to be a post rife with Texas sized clichés. How can it not be with a company with a name like “eToro” that has a logo with a pair of bull horns jutting out of it?
First of all who are these guys? Well they are one the newest FX brokers in the market who are taking a very novel approach to currency trading. They also have ties to the online gambling rackets as their CTO is David Ring who was a key R&D leader at Israeli-based 888.com (a major online casino and poker operator) according to this feature article that came out last fall:
eToro Makes Forex Trade Child’s Play
But this Israeli firm’s ties go much deeper than to just an Internet gambling website (and please spare me the term “gaming.”) They also have connections to none other than Shimon Peres, the President of Israel. It appears Shimon Peres’ son, Chimi Peres, is one of eToro’s private investors:
Pitango Venture Capital - Nechemia (Chemi) J. Peres
So how is eToro standing out in the marketplace aside from their exotic resume? Well they have created the first forex video game. You have to see the screen shots to believe them:
http://www.techcrunch.com/wp-content/etoro_match.jpg
http://www.techcrunch.com/wp-content/etoro_marathon.jpg
But aside from the cute cartoon characters inhabiting its software (which led one trader to state eToro should rename itself “eTarded”) the truth is eToro is just shoveling the same old Bull at traders. What makes me say that? Well, when I asked them if they were regulated they gave me the ol’ Texas Two Step. Check out this chat transcript below:
Quote:
Daniel: Welcome to eToro! How can I help you?
you: I was interested in opening a new account with you and see that you are based in Cyprus. Are you registered with the Cyprus Securities and Exchange Commission?
Daniel: of course
you: oh good. what is you Cyprus sec number?
you: i don't see you firm listed in their database
Daniel: I'm sorry. I can only give you support regarding our platform
Daniel: for more information you can address our website
Daniel: or retailfx's website
you: but your website says nothing about you sec license
you: what is retail fx's website?
Daniel: Online Forex Trading Software for all online FX trading | RetailFX
Daniel: this is our worldwide broker
you: this website says nothing about your license either
you: so do you have a license or not?
Daniel: I'm not sure what you are looking for
Daniel: i can help you regarding our platform
you: Do you have a Cyprus Securities and Exchange license?
Daniel: we do have a license
you: is it a Cyprus SEC license?
you: What kind of license do you have?
Daniel: I'm sorry... I don't know these details. I can only give support regarding our platform
you: ok do you have an email address?
you: who can I speak to about this?
Daniel: support@etoro.com
you: I just want to make sure you are a legitimate company
you: there are a lot of scammers in fx
Daniel: we are totally legit
Daniel: you can check with IFX
you: who?
Daniel: and the NFA
you: nfa?
you: you have an nfa license?
Daniel: IFX..our US broker
Daniel: we are regulated by the NFA
you: eToro has a nfa license?
Daniel: would you please send us an organized email with all of your questions?
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eToro is an Israeli company with a Cyprus address and a British Virgin Islands Registration. Now what kind of business arrangement is that? That is about as unaccountable as you can get. When I asked their chat representative if they have a Cyprus SEC license (which they should have if they have an office in Cyprus and are soliciting customers from Cyrpus) the rep says “of course.”
When I point out that eToro is not listed as having a license at the Cyprus SEC website I’m directed to another company that supposedly has a license, retailfx.com, I find they don’t have a license either. At which point the customer service rep breaks down and blabbers about their arrangement with IFX.
Clearly eToro talks the regulatory talk but they don’t walk the regulatory walk.
So what about this link with IFX? Well it turns out that eToro can’t accept U.S. customers. Hmmm. That’s strange. Plenty of offshore forex brokers accept U.S. customers. Why not eToro? Instead, eToro has to rely on IFX who is apparently white labeling eToro’s Sony Playstation, er, forex trading software.
It’s pretty obvious why eToro can’t accept U.S. customers. It’s because they are nothing more than a gambling shop and online casinos outside the U.S. are not allowed to accept U.S. customers. eToro’s lawyers are obviously worried that Uncle Sam will come after them with a vengeance if they start soliciting customers (not to mention the MGM Grand, Powerball, Pat Robertson, Ralph Reed and Mike Huckabee.)
What does that tell you about the kind of dealing desk these guys are running? The firm is a straight up casino- they only make money if you lose money. It is market making on anabolic horse steroids. In short, it is every currency trader’s worst nightmare come true.
By the way I sent eToro an email asking for clarification on their regulation. Of course there was no reply. Lord somebody fence these guys in…