Going offshore to escape the CFTC

Broker Discussion Forex Brokers
2028

Belize is no good! This really only complicates your tax situation in your resident country. If you insist on doing this, choose a long established place in a true tax haven domicile. Or better yet, move to that tax haven altogether. Or better yet, pick a broker that will accept your money.

2029

Here is the latest attack on retail forex in the United States —

[U]NFA looks to ban Credit Card or PayPal deposits[/U]

[B]The NFA (and those lobbying it) clearly looking to kill the Retail FX sector in the US.[/B]

LeapRate Exclusive – LeapRate has learned that the NFA (the self-regulatory body of the U.S. futures industry) has
sent a Request-for-Comments letter to various industry members regarding its plan to ban the use of credit cards or “alternative funding mechanisms” such as PayPal to fund retail customer accounts.

Here’s the full story — NFA looks to ban Credit Card or PayPal deposits - Forex Industry News

And here’s a link to the NFA’s “Request for Comments on Rule Proposal to Prohibit the Use of Credit Cards to Fund Customer Accounts” — http://leaprate.com/images/blog_files/NFA_to_ban_credit_cards_and_PayPal.pdf

2030

ScamPal err I mean PayPal should be put out of business anyway.

2031

I don’t care much for paypal, myself, but that is a very small part of this threat…to ban credit cards from use means the only alternative is wire transfer, and frank-dodd did succeed in making international wires almost impossible for 2013 on forward, my bank quit doing international wire transfers. This means going offshore can only be done by moneybookers, or other credit card transfer companies, and if the NFA somehow gets them in a half-nelson, the days of off-shore may dissappear…
This means I would need to fund accounts before they make this law (which will happen, eventually), and hope my strategies perform good enough, to never fund them from the outside again.

Also, very important sie note for Finfx users like me…

I was just sent an email from them yesterday that I just found which says on Feb 9th, they are switching their server time to 0 GMT, and disregarding daylight savings time. They advise anybody using EAs that use server time to be aware of this.

2032

Clint,
Thanks for the heads up and link to this letter. The gist of their argument seems to be they are “worried” traders are using “borrowed funds” rather than cash risk capital to fund their accounts. Wow, talk about overreach. What about debit cards? Is that not cash? And how do they know the Paypal user isn’t using ACH transfer rather than credit card for payment? This argument doesn’t even begin to hold up to scrutiny.

EDIT: Didn’t think about this before, but being NFA, I guess this would be enforceable only on the US-based Forex and Futures brokerages rather than its customers, making this different from the “on-line gambling” law which directly prohibits credit card and money transfer companies from making electronic transactions for US residents on gambling sites. I don’t think the NFA (or CFTC) has the authority to force Mastercard to disallow a credit card transaction I make with one of my offshore brokers. Do they?

Regarding offshore, if they do manage to cut off use of credit cards and paypal, and even bank wire transfers, there are still the “digital currencies” we could use. I learned a little about these methods recently when trying to fund a particular broker using Liberty Reserve…

  1. Paypal is not considered a true digital currency because the transaction can be cancelled like credit card, so you won’t find a dealer willing to exchange a digital currency for Paypal.

  2. Funding a digital currency like Liberty Reserve using credit card will be extremely expensive. I’m too embarrassed to tell you the markup I had to pay, but even a loan shark would have blushed.

  3. Funding the digital currency account via cash transfer such as Western Union or Moneygram is probably less expensive percentage-wise for larger amounts, though I haven’t tried that yet.

  4. Once you do get a digital currency account funded, it can be exchanged for other digital currencies fairly easily and inexpensively. Most digital currencies are denominated in a major currency or gold.

  5. But the most extreme version of digital currency has got to be Bitcoin, which freely floats as its own currency. I was amazed to learn there is actually a bitcoin exchange (MtGox) where you can buy/sell bitcoin with a reasonable spread. Well, actually there are multiple bitcoin exchanges but I think MtGox is the biggest. Anyway, if you want to buy/sell bitcoin, you first have to get some other digital currency to fund your account on the exchange.

  6. I noticed there are a couple of FOREX brokerages out there that allow bitcoin funded accounts, but none yet that accept US residents.

  7. Bitcoin is a fascinating concept to me because it is the closest thing you can get to a simple two-party cash transaction over the internet. The bitcoin payment goes direct from your own bitcoin purse on your computer, smartphone, etc. to the merchants bitcoin purse. There is no third party involved, however an anonymous transaction is recorded in the bitcoin “block chain”.

Anyway, I plan to continue to research ways to fund and exchange in digital currency. This may become a more important funding option in the future. Might be an interesting sidebar forum.

2033

Hi Pipcompounder,
Just had a quick question for you. You mentioned moneybookers. I saw FinFX allows deposit/withdrawals via moneybookers. Tried to use moneybookers a while back for FXChoice, but transaction was blocked for US residents. Do you know if moneybookers works for US residents for FinFX?

2034

Yes, it does. Who knows for how long.
You do have to be careful with them…Finfx allows them to be used as a portal, instead of having to register with them. If you use them for other things, like selling thing on e b a y or something, they can lock the account up from people paying you, so for tfring money out of the account, foreign brokers should be able to wire to your bank, even if your bank can’t wire out internationally. Finfx only charges $5, I believe, for wiring out of trading account to your bank.

2035

Looks like Forex FS (currently on the list accepting US residents) plans to go live with Dukascopy Bank’s JForex platform in the near future. I just downloaded the demo. It includes over 50 currency pairs plus metals. Pretty neat!

2036

Does anyone know of an offshore forex or forex style broker that also offers trading in 10 or more stocks? Concerning funding, OKPay using bank wire deposits to add money to OKPay seems like a good way to get money into some offshore brokers.

2037

Updating my last comment, I contacted OKPay’s support, and they told me today that a person can use postal mail to send an old fashioned bank paper check to OKPay, sent to a Prague, Czech Republic address, to fund OKPay. They call it “cheque cashing” which takes about 2 weeks to complete. Hopefully the Dodd Frank people will not tamper with the mail system in the future.

2038

I have an account with Varchev. They offer a nice selection of US and European stocks (no UK). Also, according to their website, X-Trade Brokers offers a huge selection of stocks, but haven’t used them personally. You probably know this already, but downloading the demo is a good way to check the offered products, spreads, swaps, etc.

2039

Thanks, Shatners Last Stand, for the information. I will check them out. I’ve noticed that high leverage stock day trading sometimes can be as profitable as currency trading.

2040

Hi Compounder,
Appreciate the info about OKPAY. Found their webpage on the process (below), but got stuck on where it asks for “an indemnity form including a power of attorney”. Did you have to do this?

https://www.okpay.com/en/services/online-banking/cheque-cashing.html

2041

Yes, I saw their instructions involving some type of proof I was the owner of the check, but I never tried to thoroughly understand it since I never actually planned to send them a paper check, yet. Maybe when they receive a check they will then email you a form to sign and email back to them. To understand what they are referring to, just ask their support department about it by email. They’re fairly friendly and reply within 24 hours, and don’t seem to get tired of answering questions. They also charge a $10 minimum fee to process a paper check. The reason I mentioned the paper check route is in case bank wires to offshore brokers suddenly become illegal. OKPay is not a forex broker, though, so it seems they would be safe from such a Dodd Frank tactic, although you never know what they might pull. OKPay for many Europeans is similar to PayPal for Americans. Getting “verified” by OKPay is easy, similar to being verified by a broker. I plan to bank wire some money to OKPay this coming week to get some trading funds into a forex broker.

2042

The Commodity Futures Trading Gestapo strikes again.

This time it’s [B]Halifax Investment Services, Ltd[/B] (in Sydney, Australia) being sued by the little nazis at the CFTC for “soliciting” American clients, and opening forex accounts for them.

Here’s a link to the Gestapo Press Release.

And here’s a link to the Halifax website (if it hasn’t already been disabled).

Oddly enough, Halifax has been in Group 2 of our Offshore Broker List for over a year. (Group 2 is the group of brokers who will not deal with U.S. residents). I don’t recall how and why they ended up on that part of our List. But, we must have missed something along the way — they [B]have been[/B] accepting U.S. clients.

Bottom line: the current Gestapo action doesn’t affect our List, but it’s one more attack on American freedom by the Regime in Washington.

2043

Can someone summarize what (offshore) brokers currently accept american citizens?

2044

I just spoke with a rep from finfx in finland, and they still do accept us citizens, and I think the CFTC can’t touch them because forex is not considered securities in Finland so they don’t have to register with anybody.

2045

I found some additional information about this action on forex magnates:

CFTC Sues Australian Broker Halifax Investment Services for Unlawfully Soliciting U.S. Customers | Forex Magnates

They included the legal document submitted to the “US District Court for the Northern District of Illinois Eastern Division”
(Chicago). Basically, the CFTC accuses Halifax of offering their services to US residents who were not Eligible Contract Participants (ECPs). That seems to be the basis for the lawsuit.

So, if I’m understanding this correctly, US residents who are also ECPs CAN trade FOREX anywhere in the world they want to. That is, the CFTC would not initiate a lawsuit against the firm for accepting ECPs.

Here’s a link to the definition/criteria for Eligible Contract Participant:

http://www.iso-ne.com/committees/comm_wkgrps/prtcpnts_comm/ftr_lttr/mtrls/may232008/eligible_contract_participant.pdf

On the list are high net worth people. ECP status is automatic for individuals with “total assets in an amount in excess of:
(I) $10,000,000; or
(II) $5,000,000 and who enter into the agreement, contract, or transaction in order to manage the risk associated with an
asset owned or liability incurred, or reasonably likely to be owned or incurred, by the individual”

It appears that “the rich” can and do “escape the CFTC” on a regular basis. I guess this would be similar to hedge funds which are not regulated and have a high net worth participation requirement.

[B]Interestingly, the CFTC can also grant ECP status to “any other person that the Commission determines to be eligible in light of the financial or other qualifications of the person”. [/B]

[B]Maybe we should write the CFTC requesting ECP status to see if they reply.[/B]

2046

I wish one of these brokers would stand up to the NFA,CFTC and fight back instead of cowardliness. If I had the money I would. Maybe we should form a traders association and use the money to fight CFTC in court that all they are doing and these laws violate our rights as citizens and violate the free trade act and other laws i’m sure.

This makes me mad as hell to see them bully brokers and us around. I hate this government with a passion. My wife and I are seriously considering moving to a free Country within the next 2 years.

2047

jcvmw - not to go off-topic, but do some research on the difficulties ex-pats face when trying to sever ties with Mother USA, and you will find that Washington has implemented a “Hotel California” immigration strategy – it’s a lot easier to get into this country than it is to leave.