Italy: FXCM Scandal: The USA Chases The Broker From The Market.

Last Updated: 25 April 2017
Article by Calogero Boccadutri

An FXCM (Forex Capital Markets) scandal. FXCM will no longer be able to operate in the United States market.

The scandal is exploding after inquests by the CFTC, the regulatory body for USA markets, which found proof of highly harmful behaviour with regard to their own clients, against whom brokers often bet.

A new scandal is hitting FXCM, a stockbroker specialising in the foreign exchange market. The regulatory body for markets in the USA, the Commodity Futures Trading Commission (CFTC), has demanded its unceremonious exit from the United States market.

The accusation that is weighing upon the famous broker is that of having acted against the interest of its own clients.

The alleged incidents go back to the period between 2009 and 2014, years in which unverified information about the actual relationship with the main market maker was given to clients.

In fact, FXCM bet against its own clients.

FXCM has created a new company through a spin-off achieved through algorithmic trading.

This company, in its role as market maker, has always enjoyed the trading and lending privileges granted by FXCM without interest. As further proof of the link between the two companies, the staff was the same as for FXCM.

The market maker has duly bought up a large part of the trading volumes of FXCM. It was in this predicament that they ended up taking up positions against those of FXCM retail clients.

FXCM has not admitted guilt even though it has not rushed to repudiate the accusations, and has paid up the fine of seven million dollars.

To pay for this the initial consequence was that the company fired 150 employees from its US branch.

Meanwhile, in the USA

FXCM has announced the sale of the accounts of its own American clients to GAIN Capital Holdings, the owner of the brand

The exit from the US market has not completely compromised the activity of the group, which will be able to continue providing interim services to its clients and work together with GAIN Capital to guarantee a painless transition.

GAIN Capital will pay 500 dollars for every transferred account that accomplishes at least one new trade in the first 76 days following the closure of the purchase agreement. 

Previous scandals

The phoenix had already been reborn from the ashes in 2015, the year in which it suffered the consequences of Banca Svizzera's decision to abandon the Franc's Euro cap, but dark shadows have not been missing either before or since this fateful date.

In 2011, the broker was fined two million dollars by the American NFA (National Futures Association) and sentenced to pay back the money to its clients.

In 2014, there came a sentence from the FCA to pay four million pounds sterling to the body, plus ten million to clients.

Then there came the annus horribilis, 2015, in which they suffered enormous losses, more than 220 million dollars worth of clients' money, because of the position taken by SNB (Banca Nazionale Svizzera), which decided to further lower the limit on Euro/Swiss Franc exchanges to 1.20.

At that time salvation came thanks to the intervention of Leucadia National, a group that controls Jefferies, a broker. Leucadia pulled three hundred million dollars out and saved the company.

2015 was also the year of attacks by hackers, which hit the accounts of many clients, thereby effecting a series of unauthorised bank transfers on behalf of FXCM.

The attack proved the utter fragility of the system, but the company overcame this scandal as well.

Code red

There are still shadows in this sector, with umpteen scandals, but what will be the consequences?

The regulatory authorities in the rest of the world will not be able to remain indifferent towards this precedent, because FXCM has acted for years, trading in a deceptive way thanks to the exploitation of the "grey zones" of the "no-dealing desk" platform*.

And what if what happened in the United States had also happened abroad? That the conduct and actions of the FXCM caused damages to the clients is more than just a theory. Therefore, those affected can make a claim against the broker to ask for however much they invested and lost in suspicious circumstances back.

A group of French traders is mobilising to evaluate the reimbursement requests for potential losses suffered in the period during which FXCM acted against their own clients.

If it can also be shown that in other countries the same fraudulent methods were adopted as in the United States, it would be legitimate to ask the company for a refund of losses between 2009 and 2015, years during which fraud was clearly demonstrated, without excluding successive years.

Boccadutri International Law Firm has received warnings of shady operations on the part of the broker under accusation and is prepared to take legal action against FXCM.

If you have had dealings with an FXCM broker you can explain your story to our lawyers and agree upon the best path to take.

Please fill in the application form here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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