Are Your Funds Safe? NFA to Shut down small forex fcms

[MWil]

I'm a new trader looking at all brokers. One of the ones I was considering was MBTrading.

I looked at the cftc site, and they're only showing $3.2 million net capital. Should I be concerned seeing as they don't meet the $5 million criteria? However, I've heard MBTrading is a reputable broker... Just a little confused.

[kevinpeterson]

Originally Posted by MWil

I'm a new trader looking at all brokers. One of the ones I was considering was MBTrading.

I looked at the cftc site, and they're only showing $3.2 million net capital. Should I be concerned seeing as they don't meet the $5 million criteria? However, I've heard MBTrading is a reputable broker... Just a little confused.

Hi MWil,

I read on some other forums their response to the same question and they say they have some sort of agreement with another firm which has over $8million in net excess so they claim this is not an issue for them. I personally would still not trade with them as they charge commissions (I prefer just a spread) and they offer crummy leverage. Plus even if they have enough excess capital to get them out of this bind, the NFA has testified that they are looking to raise capital requirements to $20million eventually. Not sure these guys can manage that. I think it better to go with one of the larger brokers like Oanda or FXCM who have a much higher chance of being around next year. I hope this helps.

[MWil]

Thx Kevin. I was also looking at EFX and that platform looks really cool and it looks like it has some really neat features. However, again I go to the cftc site, and I see only $4.5 million.

OK, so I then proceed to the online chat with them, and ask about the $5 million. The rep said it's not a problem and they have over $5 million. I asked exact figure and he said he wasn't sure.

I know Oanda definitely has in excess of the $5 million. But I would like to have a couple other options besides them.

LASTLY, I figure seeing as a sound financial background, is one of my most important criteria in choosing a broker, I decided to go through the brokers one by one from the cftc site. I came across FOREX LIQUIDITY. According to the figures, they have 36.8 mil. I go to the website, and I see they've been shut down. This is scary...

[sal500]

Yes I too went in to chat online (at EFX) and the guy said "We're above the threshold" but that really doesn't assure me at all. Seriously, I am considering waiting until the new year before I open an account! It feels as if the best thing to do is wait until after 12/21/07 to see who is surviving. But then again, what will NFA exactly do on 12/21/07?? Automatically shut down those who are undercapitalized just like that?

[juxtatrader]

Originally Posted by kevinpeterson

Hi MWil,

I read on some other forums their response to the same question and they say they have some sort of agreement with another firm which has over $8million in net excess so they claim this is not an issue for them. I personally would still not trade with them as they charge commissions (I prefer just a spread) and they offer crummy leverage. Plus even if they have enough excess capital to get them out of this bind, the NFA has testified that they are looking to raise capital requirements to $20million eventually. Not sure these guys can manage that. I think it better to go with one of the larger brokers like Oanda or FXCM who have a much higher chance of being around next year. I hope this helps.

I would check really hard into FXCM. If you are really concerned about your money then I would look at more then just their net cap at the moments.

[forex savior]

For those of you caught in the FXLQ meltdown this thread at Forex Factory has some excellent information:
FXLQ Shut down temporarily by NFA - Page 3

This trader posted the following which shows you the incredible maelstrom that FXLQ is currently mixed up in:

There are certainly strange things happening with this whole situation. I have a 6 figure account with FXLQ and have been with them for about a year and a half, very happy with them until now, by the way. On Tuesday evening I started my "work day" during the Asian market and tried to put a pending order, to my surprise it would not take it, so after repeated attempts I called the trading desk and they gave me the news on the whole situation. As it was explained by them, it seemed like something that would be resolved in a day or two.

Nevertheless, I filled out a request to withdraw my funds and then went to the NFA link to read the whole case, which clearly portrays a picture of FXLQ making up capital assets with an inexistant Bond from ABN ARMO BANK (one of EU's biggest banks).

Now, I was worried, so I decided to take the next plane to LAX at 8:00AM EST (I live in South Florida). I was in their office by 12:30 PM PST and everyone seemed to be working normally along with two auditors from NFA. After speaking to one person and another and waiting for several hours I was told that they had been denied permission by Jenifer Sunu, from NFA in Chicago to disburse any of my funds. Unfortunately, it was too late to call her in Chicago so I had to wait until the next. . During this time, several of the company executives met with me, including Robert Gray, and they explained how they have funds in different financial institutions in Europe and that the NFA did not want to accept this and ordered them to repatriate all these funds, which they were in the process of doing, but this was not an overnight ordeal. Robert Gray said that this order to repatriate funds had come in on Monday and the Member Responsibility Action, came in the next day (Tuesday).

The following morning I started calling Jenifer Sunu and finally, after about 4 hours of failed attempts, she finally picked up the phone. After listening to everything she had to say, I practically lost all hope of getting my money back, or at least the whole thing. The first thing I asked her was, why she had not authorized FXLQ from giving me my money back and she responded that the audit shows that there is ten million dollars deficiency. In other words, (her words) she said that my position was that of any creditor and had the same importance, legally, as the phone bill, and therefore, if there is a shortfall of 10 million dollars, the creditors would receive their funds in the proportional amount of what is "left". She gave me an example of when a "bankrupt" company dissolves. She even said that this was a done deal on their part. That it was out of their hands and that the CFTC had been notified for them to name a liquidator and dissolve the company and pay creditors with whatever funds are left and they (CFTC) would be in charge of any charges or legal actions against the principals and/or executives..... In short, not much hope.

As soon as I hung up with her, I took off to FXLQ and met with Robert Gray and told him my conversation with Ms. Sunu. He was outraged and immediately called his lawyer into his office and they called Ms. Sunu. While the attorney was trying to reach her, Robert showed me how they had already received two wires from Europe, one for over two million and the other one for a million something.

A few minutes later, the attorney came back to Robert Gray's office and said that Jenifer Sunu, was denying everything (several other customers had also called with similar stories, some where told that they would be lucky to get 50 cents on the dollar). So they asked me, if I wanted to talk to her, which of course I did. We put her on speaker phone and she started by saying that I had misunderstood her, she acknowledged that FXLQ had already received 2 multimillion dollar wires from their offshore accounts and that in no way was this a done deal on the part of the NFA, completely contradicting herself from my earlier conversation.

This, in a way, gave me renewed expectations but at the same time it is really strange that the NFA would bad mouth the company to the extent of practically giving me a verbal "death certificate" and then when confronted with the "patient" takes everything said back. Why?

As far as my perception, to me FXLQ has always showed honesty and integrity, at least compared to a big list of other FXBrokers I have had accounts with. I had many experiences where they honored and fixed, to my benefit errors created by MT4. As far as my face to face meetings with them last Wednesday and Thursday, I get the feeling that they are truly trying to survive this ordeal and the proof is in the millions that they repatriated on Thursday, which shows that instead of folding they ARE actually bringing money in. They think, that ounce they come out of this NFA persecution, they will prove to be stronger than before, which is obviously true, BUT the question is, if they are able to prove that their financial solvency is adequate and in line with what was previously reported, will they be able to continue business as usual or will the damage caused by this whole ordeal be too deep to recover?

I'd like to also mention that I asked Ms. Sunu in my first conversation, what good is their monthly FCM Financial Data Report, if the information in it is not reliable; She answered that all companies are audited every year, but it seems that documents that were accepted last year, are now questionable. So what good is basing your decisions on choosing a broker on this report if its validity is questionable.

In general, I prefer to have the NFA than nothing at all, as most
other countries, but it definitely needs a lot of work to be an real
and effective controlling organization.

UPDATE: I just got a call from one of the executives that told me that they received another four million (I did not ask if they received anything on Friday) and they had been trying to get the NFA to authorize the release of customer funds but had no positive response yet and they expected to get the authorization, hopefully, by tomorrow.
Regards,
CMA

If you have money at FXLQ, MultibankFX or any of the other brokers that clear through FXLQ GET YOUR MONEY OUT NOW IF YOU STILL CAN!

[forex savior]

Upon second glance at the latest CFTC Capital Report I have come across a rather alarming capital number for a firm that previously have been well above the $5 million minimum capital requirement. The firm is ODL securities and they reported only $2,566,000 in adjusted net capital. The previous month they reported over $9 million in adjusted net capital. That is quite a stunning drop.

But what makes ODL's current number even more disturbing is that in October the NFA gave ODL a beat down in a BCC action in which they charged ODL with a bucket load of financial requirement violations that seriously calls into question the manner in which this firm is run.

NFA Charges:
• F.R.SEC11(a)NEW - FDM MAINTAIN ADJUSTED NET CAPITAL
•F.R.SEC11(b)NEW - FDM TAKE CONCENTRATION CHARGE-UNAFFILIATED
• F.R.SEC11(c)NEW - FDM TAKE CONCENTRATION CHARGE-AFFILIATES
• F.R.Section 11 - LTM REPORTING
• C.R.2-10 - RECORDKEEPING FCMS/IBS
• C.R.2-36(b)(1) - CHEAT, DEFRAUD, DECEIVE FOREX CUSTOMERS

The NFA gives example after example of how this firm misreported its financial numbers and failed to meet the most basic financial regulatory requirements expected of a Forex Dealer.
BASIC Case Summary

During the examination NFA discovered that ODL had failed to prepare an accurate net capital computation as of March 31, 2006. ODL had improperly classified cash held at a Cayman Island bank as a current asset when it should have been classified as a non-current asset, failed to properly account for customer debits, netted customer debits against other credits in non-related customer accounts, and failed to the appropriate haircut charge on money market funds held at a brokerage firm. As a result, ODL overstated its net capital by approximately $448,000.

ODL failed to take the applicable concentration charge on transactions with both unaffiliated and affiliated counterparties. This failure resulted in an overstatement of ODL's net capital by approximately $1.3 million on March 31, 2006 net capital computation.

As a result of adjustments to ODL's capital computation resulting from the violations referenced above ODL failed to maintain the required minimum adjusted net capital as of March 31, 2006.

NFA's review of ODL's financial statements during the examination revealed that ODL had also failed to maintain the required minimum adjusted net capital as of April 30, 2006.

Subsequent to NFA's examination, ODL has consistently failed to maintain the required minimum adjusted net capital. Specifically, ODL's adjusted net capital fell under the required minimum on May 31, 2006, August 25, 2006, September 30, 2006, November 10, 2006, November 17, 2006, November 30, 2006, December 1, 2006, December 22, 2006, and January 19, 2007.

The NFA's final decision was as follows:

ODL and King were ordered to be jointly and severally liable for payment of a $165,000 fine. Dubuque was ordered to pay a $3,000 fine. In addition, Dubuque was ordered to tape record, for one year, all conversations between himself and existing or potential customers; retain the tapes for one year from the date they are created; and make the tapes available to NFA upon request.

With ODL's net capital woefully below $5 million and in light of the NFA blowing the lid off ODL's appallingly bad book keeping and shoddy accounting practices I am putting out the warning to the trading public: Avoid ODL and if you have money at ODL it's time to get your money back and find yourself another broker.

[forex savior]

Royal Forex may no longer be an independent company but that doesn't mean it still doesn't have sins to pay for. Today the NFA fined them $75,000 for the kind of standard, run of the mill incompetence that we've all come to expect from the poorly capitalized. Below is a summary of the NFA's Decision:

NFA orders Florida forex firm and its CEO to pay a fine of $75,000

December 13, Chicago - National Futures Association (NFA) has ordered Royal Forex Trading LLC (Royal), formerly known as Freedom FX LLC, and its chief executive officer, Justin J. Marsch, to pay a fine of $75,000. Royal is a Futures Commission Merchant and Forex Dealer Member located in Boca Raton, Florida. The Decision, issued by NFA's Business Conduct Committee, is based on a Complaint filed in September 2007 and a settlement offer submitted by Royal and Marsch.

The Committee found that Royal and its unregistered solicitors used misleading promotional material and that Royal failed to collect and maintain required security deposits from its forex (foreign currency futures) customers. Additionally, the Committee found that both Royal and Marsch failed to adequately supervise the firm's forex operations.

The guys at IKon really have their hands full...

[forex savior]

Queue up the music from Swedish Glam Band "Europe" because this week is when the Dead Pool comes to an end. YouTube - Europe-The Final Countdown

This Friday is the NFA deadline for fx firms to meet the minimum $5 million capital requirement. Two updates to report:

GFS Futures & Forex has just made an announcement on their website that they have received a $6 million capital infusion to put them over $10 million thus ensuring a stay of execution from the NFA hangman.

Meanwhile, Velocity4x has thrown in the towel and is handing over their clients to Gain Capital.

December 14, 2007

Dear Valued Customer:

In an effort to better serve the needs of our customers, Velocity4x is pleased to announce a new partnership with FOREX.com, a division of GAIN Capital Group. Effective Friday, December 14, 2007 at 5:00 pm ET Velocity4x will transfer all customer accounts to FOREX.com. Following the transfer of your account, FOREX.com will provide all custody, clearing and support functions.

FOREX.com has worked closely with Velocity4x to ensure the transfer of your trading account is as seamless as possible. You may continue to access the trading platform as you have in the past and utilize your existing login and password.

Trading activity in your account after December 14, 2007 will confirm your consent to be bound by the FOREX.com Customer Agreement. A link to the FOREX.com Customer Agreement is provided here for your convenience: Click here to view the FOREX.com Customer Agreement.

If you choose to close your account following the transfer, you may communicate your decision to FOREX.com directly, through email at velocity4x@forex.com or telephone at 908.458.8274 and FOREX.com will honor your request and return your account balance to you.

If you have any questions regarding this transfer you may contact Velocity4x at 312.546.6288 or via e-mail at accounts@velocity4x.com or FOREX.com at 908.458.8274 or via e-mail at velocity4x@forex.com.

Through our new relationship with FOREX.com, we look forward to providing you with superior service. FOREX.com is a registered Futures Commission Merchant and a member of the National Futures Association (NFA ID# 0339826). You may also obtain additional information regarding FOREX.com and Gain Capital Group, LLC on NFA's web site.GAIN Capital's corporate headquarter address is 550 Hills Drive, Bedminster, NJ07921 and its main telephone number is 908.731.0750.

Very Truly Yours,
Velocity4x

The following firms have still not publically indicated they have met the requirement. Beware these firms until further notice:

1) SNC Investments: $1,152,000
They are well below the $5 million capital requirement. It is highly unlikely they will make the new requirement at this point. I advise customers to leave this firm and look for greener pastures.

2) Wall Street Derivatives: $1,228,000
This firm is based out of New Zealand and I'm not even sure they have any U.S. customers as their U.S. website is out of service.

3) Advanced Markets: $1,322,000
Amifx is already teetering on the brink as they are the subject of a business conduct committee case before the NFA in which they are cited for a whole host of financial violations including not meeting the old capital requirement. This firm does not have much of a future.

4) AlpariFX $2,481,000
Little known European firm. Well under the cap requirement.

5) Solid Gold Financial: $2,040,000
Solid Gold's future is now in serious doubt. Like many of the other firms on this list they have been charged by the NFA with failing to meet their existing capital requirement. When you can't meet the old requirement it stands to reason you won't be able to meet the new one either. Solid Gold is anything but a solid investment at this point.

6) Bacera Corporation: $2,300,000
Like a turd that won't flush Bacera Corporation just refuses to go down the drain. The Savior wrote Bacera off over the summer as sources knowledgeable about them stated they were going to close up shop. But no, they are still hustling the folks in LA for fresh deposits. In September Bacera settled a complaint with the NFA after it was discovered they were undercapitalized to the tune of $1.2 million. NFA reported Bacera only has about 200 customers as it is. But to those 200, do yourself a favor and get yourself another broker because sooner or later the pipes are gonna get cleaned and these guys are going to get flushed once and for all.

7) ODL Securities: $2,566,000
Ravaged by undercapitalization issues.

8) Forex Club: $3,320,000
They still have not hit the minimum $5 million mark. And don't forget since they are a market maker they have other financial requirements to meet as well. They still haven't publically done so.

9) Easy Forex: $3,789,000
Under siege for their sleazy sales tactics, it's hard to imagine the NFA isn't going to drop the hammer on them soon.

10) Money Garden: $5,035,000
While they have crept up over the $5 million mark MG is notorious for their 400:1 "flexi" accounts which will require MG put up a minimum $10 million in capital in addition to other financial requirements for being a market maker. They are not even close to doing this despite their CEO's insistence they could easily get the money last summer. It looks like this veteran of the industry is about to be forcibly retired.

[forex savior]

Well the CFTC has officially stepped in to put an end to the shenanigans at One World Capital. I have been reporting on the decline and fall of One World Capital for over six months now so this should be no surprise to anyone following this thread. But it appears that there is a serious shortage of funds at One World which is going to result in heavy losses for customers. This is exactly what I have been warning about for several months now.

CFTC Sues One World Capital Group, LLC and its President John Edward Walsh for Inability to Demonstrate it had Required Capital

CFTC Sues Forex Dealer One World Capital Group, LLC and Its President John Edward Walsh for Inability to Demonstrate it had Required Capital

Winnetka, Illinois Forex Dealer May Owe Millions to Customers
Washington, DC – The U.S. Commodity Futures Trading

Commission (CFTC) announced today that on December 13, 2007 it sued One World Capital Group, LLC (One World) of Winnetka, Illinois, a registered futures commission merchant (FCM), and its President, John Edward Walsh of Lake Forest, Illinois, charging them with inability to demonstrate compliance with capitalization requirements and with failure to maintain required books and records.

On the same day the case was filed, the CFTC won an asset freeze and other emergency relief that will enable the Commission to freeze the assets of One World and safeguard the interests of its customers.

The complaint alleges that One World has been unable to demonstrate that it has maintained at least $1 million in adjusted net capital, the minimum requirement needed for FCMs that are Foreign Currency Dealer members of the National Futures Association (NFA).

According to the CFTC complaint, since at least November 28, 2007, One World and Walsh failed to demonstrate compliance with the net capital amount as required by the Commodity Exchange Act and CFTC regulations. As of December 10, 2007, the complaint charges, One World failed to demonstrate that it had any net assets. While One World appeared to possess $554,000 of funds held in customer accounts, since at least November 2, 2007, the NFA has been receiving complaints from customers alleging that they are unable to get their funds back from One World. The complaint alleges that the amount claimed outstanding by customers exceeds $4 million. The complaint also alleges that Walsh conceded an inability to identify all of One World’s customer liabilities. Furthermore, the complaint charges One World and Walsh with failing to maintain books and records as required by a CFTC regulation.

$4 million owed to customers? This will not be a very Merry Christmas for the customers now trapped at One World Forex.