Does This Sound Familiar?
Retail forex trading is high risk. Every broker’s website reminds us that there are no guarantees of profits, and it is very easy to lose large amounts of money quickly, especially if you are trading with high leverage. Another risk, however, is the possibility of investing funds with a scam broker or an unreliable one. That may only become apparent when the trader encounters forex withdrawal request issues. Does the following post from a forex complaint blog website ring true for you?
“I have been dealing with this broker for a long time. They are good for trading and for making other investments, too. In the past, I have always been able to get a withdrawal request processed quickly, but now, for some reason, I have been waiting over two months for my money. I tried contacting the company, but they are not replying to my calls or emails. I hope they make my payments soon, but I cannot help but think the worse. Is my broker in trouble or have I been completely scammed?”
ForexFraud.com receives many complaints like the one above but answering the last two questions requires much more information. In this case, no one from the broker replied. A failure to communicate is indicative of a host of other issues, ranging from poor customer service to financial insolvency to outright fraud. In many of our investigations, there is a lengthy litany of emails going back and forth describing several misunderstandings or blatant excuses for why a withdrawal is being delayed, or an account has been frozen. Sometimes there are legitimate reasons for the delay, and the withdrawal request is eventually processed. Other times, traders are not so lucky.
All you want as a trader is a return of your own money. If a bonus is involved, and you have not fulfilled the requirements attached to it, then the broker is entitled to keep that amount, but the client’s deposit money should still be returned. Many customers, however, fail to read the fine print in the agreement that applies to any promotional funds added to your account. You may think the broker is giving you money, but it actually wants you to overtrade, giving it an ample period to recover the bonus and more. For traditional forex brokers, the extra trading brings more fees. Binary option brokers, however, need you to lose to support their operation and pay winners.
Common Forex Withdrawal Problems
Not all forex withdrawal problems are a sign of a scam. There are some common reasons why a withdrawal request can take a while to process, some of which are legitimate. Your open positions may have margin requirements that will put a hold on a portion of your funds. Be sure to check how these calculations are made.
Regulated brokers also tend to have strict Know Your Customer (KYC) requirements to prevent money laundering (known as anti-money laundering or AML procedures) and other illegal and fraudulent activity. If a customer does not complete all these checks, upload all the required documents, and verify their identity correctly, the broker will not release their funds. Many customers object to being allowed to open an account and trade without completing these checks but not withdraw their money. Often a customer does not realise there are still outstanding tasks to complete the KYC checks until a withdrawal request is denied or delayed.
Occasionally, withdrawal requests are delayed due to customer error. The customer may have incorrectly filled in their bank account details or left out important information. They may have requested a withdrawal to a payment method not supported in their region, an account held in another name, or incorrect address details. All details on the receiving account must be the same as on the trader account. Legitimate brokers do not usually allow withdrawals to third-party accounts, as this can be a sign of potentially fraudulent activity and may even be someone who has hacked the system trying to steal money from the trader’s account.
It is also possible that you have invested with a scam broker, and you will never be able to withdraw your funds. One big red flag when it comes to withdrawals is if a broker refuses to pay out and tells you that you need to pay in more before you can withdraw the money already in your account. Usually, you will be told there is an admin fee to pay or that you need to cover taxes before withdrawing your money. This is generally a sign that you have been scammed.
Failure to Complete Bonus Requirements
Another common reason a broker does not process your withdrawal might be that you have failed to meet bonus requirements. Bonuses from forex brokers are not available in every location. Some regulators do not allow brokers to offer incentives to encourage traders to invest with them. If a trader uses a bonus, however, they will have to complete certain requirements before withdrawing funds.
Forex trading bonus requirements are determined by the broker, so they are different at each brokerage. There will tend to be rules about how you can trade, and the broker has the discretion to disallow a withdrawal of funds if and when he suspects foul play. What is this “foul play”, you ask? That depends; of course, the broker and the traders will often not agree. A highly publicised case involving IronFX and a group of Chinese traders a few years back resulted in hefty fines and recriminations from all parties. The broker accused several traders of fraud and theft, while the traders accused the broker of the same.
We will discuss the details of this nasty episode later in this article, but for now, be aware that each broker is responsible for developing its own rules. There may be very complicated formulas that apply a percentage based on your account value before and after the bonus has been added to determine what amount of your account balance can be subject to withdrawal. Other brokers may segregate the bonus in a separate account and allow you to do whatever you want with your deposited funds, independent of the bonus amount.
Bonuses are an issue that can cause particular problems within the binary options space. Binary options are very similar to online gambling, and binary option bonuses are heftier and come with more trading requirements. Your entire balance may be locked down until you trade anywhere from 20 to over 50 times your bonus amount, at which point you have probably lost both your bonus and your deposit.
Be Wary of Brokers Offering Large Bonuses
Forex trading bonuses are always problematic. They can entice new traders to invest and lose more than they can afford. For this reason, bonuses are banned in the US, UK and EU but are still offered by some international brokers. They almost always come with unrealistic requirements, and the larger the bonus, the more difficult it can be to meet them. It is advisable to avoid forex trading bonus offers altogether. If you are interested in one, make sure you understand every word of the fine print before you commit to it.
What happened to IronFX and its bonus programs?
IronFX was known for using aggressive bonus programs to grow its global customer base, and it was highly successful. Its business model drew both scorn and competition. However, it was only a matter of time before a group of “malicious” traders developed a clever way to “game the system”, as the management of IronFX contended in legal proceedings.
The issues came to a head when more than 160 accounts were frozen due to rule violations. The firm’s Shanghai office was stormed and ransacked. Legal briefs were filed in Cyprus, and as was reported at the time, “CySEC went so far as to fine the firm €335,000, its largest fine to date, and ASIC ordered the firm to correct its disclosure documents.”
The IronFX CEO, Markos Kashiouris, noted in interviews, “Indeed this claim is related to the recently identified group of abusive traders that employ an abusive trading strategy to manipulate our promotions. This group has been placed under investigation for breach of our trading terms and pending this investigation we have put a limitation on all promotions-related withdrawals from this abusive trading strategy as we are entitled to do. We are not doing anything different from other companies in the industry in China.”
The abusive trading strategy was not divulged. It is not difficult to surmise that two duplicitous individuals could set up separate accounts and receive two bonuses. One account would buy a “High” option, while the other, a “Low” option for the same asset. Over time, this hedging approach might result in bonus money being left on the table for withdrawal – maliciously obtained “free money” from the perspective of the IronFX management.