The bankruptcy of GFX Markets

Posted on 26. Jan, 2010 by Bryan in broker, Guest Post, Link Love, Random Noise, scam

This is a guest post by Bryan from www.forexfraud.com

Forex trading has more than its fair share of scandals, yet the average newcomer is hardly knowledgeable about the great dangers involved in the process of choosing a broker. In this article we take a brief look at the case of GFX Markets in order to remind you how bad things can go in this flourishing business.

In February 2009, the clients of the forex firm GFX Markets received a brief message explaining that their account statements were full of errors. Profits and losses in account statements did not match reality, as it was reported to clients. The total amount of money controlled by GFX Markets was estimated to be around $40 million. Manager of the firm, the 60-year old Terry Freeman, was arrested and charged by City of London Police Economic Crime Department with money laundering and other financial crimes, creating a huge shocks for the clients of the broker.

“Based upon initial analysis, it has become increasingly apparent that for some clients, fund allocations of profit and loss have been incorrectly calculated.” Even before receiving this innocuous sounding statement the clients of GFX Capital were skittish about their chances of withdrawing their funds smoothly, and the broker was already on the way to bankruptcy even without the eventual intervention of the police, due to a steady stream of account closures and withdrawals attempts.

As inquiries and investigations proceed, it becomes apparent that the most important lesson that we can derive from the GFX Markets scandal relates to the highly complex relations that exist between the retail brokers and their service providers. You may be trading with one firm, assuming that you’re using an independent platform developed by the technicians of your broker, and yet discover at one point that you were benefiting from know-how and experience of a completely unrelated third-party. This naturally has serious consequences for the broker-trader relationship. If the credibility and competence of a company is owed to a third party, without any disclosure made about this fact, how justified is the trader’s confidence in his relationship with his broker?

People often focus on the best forex trading software, best broker, or best account packages while searching among the various offers on the web, but it would be a better idea to focus on the worst. It is hard to determine the best broker, because there are a large number of firms with well-developed platforms and they advertise their products everywhere. Yet the worst firms are few, they hide their failures, and are often far more skilled at camouflage. So focus on avoiding the crooks; you have a chance to make decent profits with an average broker, but little chance of recovering your initial deposit with the few but dangerous fraudsters in the forex world.

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