A Year in review: What were the major headline grabbers during 2015?

Chris Lee

Another year has come and gone, but 2015 was no ordinary year. Cyber-Fraud, major banking scandals, and blatant regulatory intervention were the themes for the past twelve months. Crooks were flexing their muscles at high levels in society, and the backlash from regulatory officials was swift and aggressive. It was as if the “Game of Thrones” had suddenly taken on a modern-day posture, complete with backroom cabals, nefarious schemes of intrigue, and outright war for control of the Seven Kingdoms.

At the end of the year, acquisition deals went amiss, regulatory compliance became and remained a hot issue, and significant fines in the billion-dollar range were levied upon many of our most prestigious global banks. Perhaps, the long and drawn out economic recovery from the Great Recession had also reduced the level of opportunity in the criminal world. It almost appeared as if a coiled spring had exploded on the scene, creating a frantic situation where fraudsters had to make up for lost time. They obviously were not achieving their revenue goals and had to ratchet up the activity on all fronts.

The Press was the major benefactor of this war on crime and wasted no time by chasing every ambulance in sight. Headlines flowed, and some stories had amazing staying power, either by being a carry-over from 2014 or by having so many moving pieces or story lines that might unravel over time. It is during times like these that serious reporting can become fun. Investigative techniques can quickly yield pearls of wisdom that must be shared with an interested fan base. And since this fan base for the most part had also sustained financial losses related to each of these stories, their participation from a complaint perspective created an avalanche of comments, each requiring a response.

Without further adieu, here is a brief recap of the major headline grabbers for 2015:

#1 – The Swiss Franc Debacle started the year with a bang.
It did not take long for calamity to strike the forex world and send a warning shot that 2015 was not going to be just another typical year. Swiss central bankers, without notice and after claiming it would never happen without sufficient warning, suddenly removed the 1.20-peg to the Euro. The forex market erupted. The Swissie immediately appreciated 40% versus the Euro in some markets, leaving brokers and traders to deal with major losses and margin calls. Billions were lost. Bankruptcies occurred across the globe. Survivors are still attempting to regain their former positions, but Swiss authorities showed no regret. Currency pegs are never successful in the long run.

#2 – Forex brokers fell like flies, but digital options emerged unscathed.
The tsunami that resulted when the Swiss Franc peg was lifted was very selective in how it meted out its punishment. If you were a traditional forex broker like FXCM or Alpari UK, then protective hedges were worthless when the spike in valuations appeared on trader screens. High leverage only made the losses even greater. Brokers typically guarantee that their clients never have to worry about negative account balances, but contracts usually have a caveat for extraordinary circumstances. Some brokers tried to collect. Some did not. A $1 billion-dollar hedge fund collapsed, and scores of other brokerage houses found new capital, were acquired, or closed their doors for good.

#3 – The CWM FX Affair revived the myth of Icarus flying too close to the Sun.
Anthony Gregory Constantinou, dubbed by the tabloid press as “the tragic son of fashion tycoon Aristos Constantinou, gunned down in his Bishop’s Avenue mansion in 1985 when Anthony was three”, bolted on the London financial scene in a blaze of glory. He and his management team were signing high-profile sports franchise deals from yachting and boxing to the Barclays Premier League. Based on complaints of shady marketing practices, the FCA orchestrated a raid on the 5th of March of CWM’s swank Heron Tower offices. Arrests were made, and it was soon discovered that nearly all of £50 million of client deposits had gone missing in foreign bank accounts.

#4 – Major rate-fixing scandals in the banking industry lead to billion-dollar fines.
Banksters are not are friends, especially the “Too-Big-to-Fail” cadre of global crooks. The Great Recession and the regulations that followed must have severely dented these bankers’ lifestyles. The scandal of the decade sprang forth, involving myriad attempts by these giants to fix rates in everything from forex to LIBOR to you name it. A yearlong investigation produced over $10 billion in fines, levied on the likes of Citicorp, JPMorgan Chase, UBS, London-based Barclays, and the Royal Bank of Scotland. To put that figure in perspective, it is estimated that over $150 billion in fines have been assessed on the banking industry over the past decade. For these crooks, fines are just another cost of doing business.

#5 – The Plus500 Fiasco grabs the spotlight and refuses to let go.
Regulators routinely find compliance issues during their on-site audits, issue corrective instructions, and then approve the corrections once implemented. It is a simple process that is common within all enterprises, especially ones that deal in client deposits. For some reason, the management team at Plus500, a leading provider of Contracts for Difference (CFD’s) and traded on the London stock exchange, chose to call the FCA’s bluff over what they deemed were minor AML documentation infractions. The FCA responded by shutting the company down. Publicly traded shares plummeted in value, a paper loss of some $650 million for shareholders of record. Regulators mean business.

#6 – Teddy Sagi and Playtech go on an acquisition binge, but regulators object.
Teddy Sagi, an Israeli billionaire with a shady past that made it big in the gambling industry, had a keen eye for value and was eager to expand his very lucrative empire. Playtech, the world’s largest online gaming software purveyor and traded on the London Stock Exchange, was Teddy’s prized possession. He had already closed a deal back in May for TradeFX, the owner and operator of Markets.com, and had put down a deposit for an option to buy Ava Trade. He also brashly moved forward with a takeover bid for the Plus500 franchise. The FCA and the Central Bank of Ireland, however, were not impressed. As previously reported, the word on the street was that his criminal background was what scuttled the deal and that regulators demanded that he sell his controlling interest in Playtech. Sagi will have to look elsewhere for acquisitions.

#7 – Recent reports suggest that Cyber-Crime is on a rampage.
Cyber-related crimes have taken on gargantuan proportions, as have the number of articles that appeared in the press over the past year on this urgent topic. Current estimates put a $1 trillion price tag on these activities, including not only direct out-of-pocket losses, but also the wasted time and effort required to correct the problems brought on by these very compromises. Experts report that, “Today’s cyber-criminals are talented, organized, efficient, and well-funded. In the last year, they have successfully attacked numerous retail and financial organizations, taking personal and financial data of hundreds of millions of consumers.” Malware downloads can send back login and password information for financial accounts, leading to online thievery at an escalated pace when the time is right. Security professionals are perplexed.

#8 – Ponzi schemes are alive and well and are thriving.
If the headline was not about cyber-crime, then it was more than likely about the latest Ponzi scheme that had been halted in its tracks. The CFTC, the FBI, and the SEC have been vigilant in this arena, but they are limited in what they can do. Unless the criminal is blatant enough to advertise his high-return guarantees in the public space where it can be detected, then law enforcement officials must wait for consumer complaints. These schemes, however, are a true global phenomenon. Reports surfaced in several markets where affinity, i.e., either ethnic, religious, or family by nature, Ponzi frauds were commonplace. Facts suggest that theses crimes are more prevalent than ever, an indication that crooks at a lower level are participating and willing to be less grandiose.

#9 – One Cyber-Crime ring down, many more to go.
U.S. prosecutors finally scored a victory against cyber fraud, when they closed in on what has been called, “Securities fraud on cyber steroids.” The Russian crooks operating out of Israel had hacked into over 87 million accounts at JP Morgan Chase and another 17 million accounts with the likes of E*Trade Financial Corp, Scotttrade Inc., TD Ameritrade Holding Corp, and Fidelity Investments. You may already be at risk.

#10 – Cyber-Crooked Christmas came to town and went.
The criminal element in our society is well funded and sophisticated, like most any other legitimate enterprise. Their strategic planning departments also plan ahead, and this Christmas was a prime example. Despite ample warnings, this Holiday Season was a Cyber-Crooked Christmas paradise, with a multitude of nasty schemes, designed primarily to obtain your personal information for future use. IBM estimates that 12 consumers fall victim to cyber-crimes each second of every day. Next year will be worse.

Concluding Remarks
Years come and go, but 2015 will go down in the history books as one ripe with fraud-related stories that kept on giving. From the removal of the Swiss Franc peg to the Euro, to the Plus500 Fiasco, and all the way through to the obliteration by regulators on two fronts of Teddy Sagi’s aggressive plans to expand his gambling empire, the front page headlines for 2015 were, to say the least, interesting. Law enforcement officials shut down major crime rings, and billon-dollar fines were assessed for rate fixing in the world of foreign exchange. All in all, there was something for everyone.

Whatever the outcome, 2016 will be unlike 2015 in a very major way – It is a Presidential election year in the United States. Press headlines will be consumed with political rhetoric, outrageous claims, and both parties accusing the other of all kinds of crimes, scandals, and misdemeanors. From a fraudster’s perspective, however, distraction is a favorite tool to be used wisely when plying their schemes. Remain skeptical and be on the look out for suspicious conmen that approach you.

In any event, 2016 should prove to be another year where regulatory officials make their mark, bankers break the rules, and the press has a field day following up on each storyline. What else is new? From the folks at ForexFraud.com, we wish you and yours a very Happy New Year and may your 2016 be filled with winning trades and prosperity at every turn!

Chris Lee

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