fbpx
ForexFraud Header

Having problems with your withdrawal request? You are not alone…

Published:
Updated:

Trading in the retail forex market is high risk. Yes, we have all been told that sobering fact hundreds of times on every broker’s website, but the true appreciation of the risk and the fear, we might add, may only happen when we make a withdrawal request, follow all of the rules, and then wait forever for something to happen. Does the following complaint on a forex complaint blog website ring true:

“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?”

At ForexFraud.com, we receive many complaints like the one above, but answering either of the last two questions at the end of the complaint requires a great deal more information to arrive at truthful answers. In this case, no one replied from the broker. A failure to communicate is indicative of a host of other issues, which could range from poor customer service to financial insolvency to being outright fraud. In many of our investigations, there is typically a lengthy litany of emails going back and forth that describe several misunderstandings or blatant excuses for why a withdrawal is being delayed or why an account has been frozen.

At the end of the day, all any trader wants is a return of his own money. If there is a bonus involved, then the broker can keep that amount, but the client’s money should not be held up for ransom… but it typically is. Many customers fail to read the fine print in the legal obligations that you accept the moment any promotional monies are added to your account. You may think the broker is giving you money, but he actually wants you to overtrade, thereby giving him an ample period of time 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.

Failure to fulfill bonus trade commitments may tie up your funds

There are a few legitimate reasons that could delay your withdrawal request. 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. If your Anti-Money Laundering (AML) documentation is not current and in order, then you will have a problem. Brokers must follow international regulations on this issue or risk penalties and business interruptions laid down by their local regulator. The Plus500 fiasco of last year demonstrated how crazy this kind of situation can get when the broker does not follow these rules.

These same rules also require that your funds follow a similar path, as when they were deposited, both in the same method of payment, as well as to the same person’s name on the account. If you try to change the how and where funds will flow, then you can also expect more delays. We wrote about these particular problems back in January of this year. As we wrote, “This type of problem is typically an early indicator that something may not be quite right with your broker. Your broker could be having financial problems, dealing with regulatory issues behind the scenes, trying to work down a large backlog of requests, or is resorting to outright fraud to stay alive.”

The vast preponderance of complaints these days, however, have to do with living up to rules set down by your broker for promotional bonuses. The broker determines the nature of these requirements, how he expects you to trade, and the discretion he has to disallow a withdrawal of his monies, if and when he suspects foul play. What is this “foul play” you ask? A highly publicized 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 a number of traders of outright fraud and theft, while the traders accused the broker of fraud and theft, as well.

We will discuss the details of this nasty episode later in this article, but for now, let’s review the type of bonus promotions that you might encounter and the associated rules of the road, if you ever expect to withdraw any of these funds, or your own funds for that matter. Keep in mind that these rules have become more expansive and inclusive after the IronFX debacle, and that each broker is responsible for developing its own set of rules. There may be some similarities, as to form, but the formulas for deriving how much of your account balance is available for withdrawal can be complex.

What kinds of bonus programs are prevalent today?

Retail forex trading, especially the binary options sector of it, is high risk. Casualty rates run high, over 65% by some estimates and may be even higher in the digital space. For this reason alone, brokers are under intense pressure to acquire new customers. Many have resorted to aggressive marketing campaigns that include a variety of promotional bonus schemes. Brokers will advertise many of these promotions on their Home Page to entice you. You may have to apply for them, enter a special code, discuss the trading requirements with a customer service rep, or sign off on specific terms and conditions. Be wary of the broker that offers exorbitant bonuses or automatically credits them to your account. He may be setting an unscrupulous trap for you, a scam in progress.

Bonuses come in a variety of forms, each with specific conditions. Here are a few:

  • Registration Bonus: Upon registration, a specific amount will be credited to your account, no deposit required:
  • Welcome Bonus: A specific amount or percentage of your initial deposit is added to your account;
  • Deposit Bonus: There may be a special incentive for increasing your balance to a higher level after you have been active for a period of time:
  • Loyalty Bonus: This type of bonus rewards you for your patronage;
  • Refer a Friend: If you solicit new business for the broker, you may earn another bonus for your effort;
  • Risk Free Trades: In this case, the broker covers your early losses to encourage you to stick around and risk more money.

You should have a choice in the matter. You do not have to accept a bonus and the stringent conditions attached to them. Be suspicious, if this is not the case.

What types of trading requirements are prevalent today?

Traditional forex brokers tend to be more lenient in their bonus trading requirements. 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 separate account and allow you to do whatever you want with your deposited monies, independent of the bonus amount.

Due to increased competition and high casualty rates, this issue has become very murky of late within the binary options space. The business model for these “all-or-nothing” options does not help either. Remember that binary options are very similar to online gambling – the House sets the odds and then uses funds from losing trades to pay winners and fund the House. There is no market that can create a “Win-Win”, as in traditional retail forex trading. In this case, the House always wins and must market aggressively for new clients.

As you might expect, binary option bonuses are heftier and come with heftier trading requirements. Your entire balance may be locked down until you trade anywhere from 20 to over 50 times your bonus amount. If your bonus was $1,000, could you afford to trade $50,000 worth of trades, before requesting a withdrawal? The odds are in favor of the House that you would lose both your bonus and your deposit long before you ever met this requirement. Many traders come to this realization after a string of losing trades and rush to request their money back. “No can do,” says the broker.

What happened to IronFX and its bonus programs?

IronFX was one of the innovators for using aggressive bonus programs to grow its global customer base, and it was highly successful. Its business model drew both scorn and competition, but 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 accounts were frozen for 160 Chinese clients and others, due to rule violations. The firm’s Shanghai office was stormed and ransacked. Legal briefs were filed in Cyprus, and, as was reported, “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 press interviews that, “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 that 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 “Free Money” from the prospective of IronFX management.

Concluding Remarks

The moral of this promotional bonus story is to be very wary of the terms and conditions attached to any bonus program. By accepting these terms, you may have dug a hole so deep that you would never be able to climb out of it. Bonus programs can often be today’s version of a Trojan Horse.