Europe’s leading financial regulators have recently been founding them involved in various scandals. TheFinancial Conduct Authority (FCA) from the UK and the CySEC from Cyprus are some of them. The truth is, while those companies claim that they defend the customer’ rights, in reality they often take the broker’s side even though the broker may be playing dirty tricks on the customer.
For example, a FCA ombudsman saw nothing illegal when one of the regulated brokers has closed a client’s trades without having the actual right to do so. Another incident also involves the FCA. The thing is, the FCA auditors somehow ignored that broker WorldSpreads literally stole 13 million dollars of client funds by withdrawing the money from segregated accounts and sending it to an offshore account.
This time we are going to talk about an incident involving the CySEC and IronFX, a major broker and sponsor of FC Barcelona.
IronFX Steals Millions of Client Funds, Regulators Keep Silent
The IronFX case is likely going to be investigated by the European parliament. The reason for that one of the IronFX victims filed a complaint against the CySEC to the European government.
The headlines say that the European parliament has already started discussing the petition filed by a Hungarian investor against IronFX on July 11th, 2017. The essence of the document signed by 50 European clients of IronFX boils down to demanding for justice and getting their stolen funds back. At the same time, the CySEC responds that they are not authorized to investigate into criminal cases. However, the CySEC keeps on fining numerous FX brokers and depriving them of licenses, while IronFX stays unpunished.
So, what will the EU parliament investigation end up with? This is unclear. Many experts say that there will be intense debates within the parliament before they arrive at a conclusion. They say, the parliament has been really passive in relation to European regulators. However, the society is now against those regulators while they think that brokers and regulators play for the same team and pursue their common goals. At the same time, multiple experts are now joining the opposing side and ask the parliament to toughen the rules and punish the violators, both the regulators and their brokers.
As for the incident itself, it started when the mentioned client for Hungary lost the access to his trading account and the funds located there. Now he isn’t sure this will ever be possible at all. At the moment he filed the complaint, he had already been without the access for 6 months. He also claims that the total amount of stolen client funds is equal to several hundred million dollars. The petition also includes the actually fraud scheme used by IronFX, as well as the complaint against the CySEC for doing nothing, not depriving the broker of the license and not making use of the bankruptcy law. Also, the petition claims that it took the CySEC’s financial ombudsman way too long to process the numerous complaints coming from IronFX clients. That’s why the investor asks the EU authorities to interfere and resort justice.
Why have the regulators been ignoring IronFX’s violations for years?
The first wakeup call related to IronFX was noticed 3 years ago when several clients filed their complaints against the broker for not withdrawing their profits.
Back then, the Cyprus Public Audit Oversight Board confirmed the fact that the broker had been spending client funds for personal needs. However, the broker was just fined and continued to work as usual after paying the fine and changing the name. At that time, the victims also addressed the Financial Ombudsman of the Republic of Cyprus but the service has been investigating the complaint ever since.
The situation made the Hungarian investor go further and address the European Ombudsman. At the same time, a number of victims filed their complaints to the European Commission. However, they didn’t find anything illegal in the regulators’ actions. It’s interesting to note that the ESMA responded to the Hungarian investoronly 5 months later. By the way, even though IronFX paid $335K as a fine, the victims of the initial case still didn’t get a penny. For the sake of comparison, the CFTC (US) uses such fines to pay compensations to the victims.
As we can see, up until July 11th, 2017, all the attempts to start a legal action against IronFX happened to be vain. And even though the ESMA ordered European financial regulators to take extra steps in order to protect clients, experts are now questioning the specific steps those regulators are going to take to comply with the order.
The IronFX traders still cannot get their money back even since the CySEC ordered the broker the settle accounts with them the next day. Now everyone seems to be curious will the European parliament settle the dispute and restore justice…
