Exclusive: IronFX Receives Legal Boost as Chinese Claims Dropped
- Having all made their complaints on the same day, the unnamed Chinese traders have withdrawn their claims against the broker
Another case in the ongoing saga concerning IronFX has drawn to a conclusion. Documents obtained by Finance Magnates indicate that 93 of IronFX's former clients withdrew their claims against the broker in mid-July.
The former clients, all of whom are from China, filed their lawsuits in the Limassol district court in 2015. Just as they had lodged their claims together, all 93 of the complainants, none of whom ever identified themselves to the court, withdrew their claims on the same day.
Little trouble in big China
IronFX’s troubles with Chinese clients can be traced back to late 2014. In December of that year, the retail broker started to receive a number of complaints that it was preventing clients from withdrawing their funds. Earlier in the year, a Chinese broadcaster had aired an investigatory report on IronFX.
The report claimed that the firm was operating in China without proper regulatory approval - something IronFX denied. It also alleged that Introducing Brokers (IBs) Introducing Brokers (IBs) An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s Read this Term) were denied their commissions, that clients could close losing, but not winning trading positions and that deposits, which were supposed to go to European banks, remained in China.
In response to the Chinese broadcaster’s claims, and in support of its initial public offering efforts in 2014, IronFX hired a consulting firm to review the accusations made during the broadcast. According to the broker, the consultants’ investigation found that the accusations were unsubstantiated and no legitimate deposits were withheld.
By July of 2015, the number of complaints against IronFX had ballooned to over a thousand, although some of these were duplicates. To be fair to IronFX, and to put this in some context, the broker has 1.2 million accounts globally, meaning the complaints made up only a fraction of the broker’s client base.
Despite being spread across the world, the complainants all had one thing in common: they all claimed they could not withdraw their cash. Concurrent leaks to the press, which Finance Magnates previously reported, indicated that a total of $176 million was owed to claimants. That figure is now in doubt as, thus far, only $300,000 worth of claims against the broker have been made
Settlement with the Cypriot watchdog
In the same year, an investigation by the Cyprus Securities and Exchange Commission (CySEC CySEC The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision Read this Term) found no definitive proof of wrongdoing but maintained that there were “reasonable suspicions of [IronFX] having committed possible infractions of the Investment Services and Activities and Regulated Markets Law of 2007”. As a result of this, IronFX settled with CySEC and paid the regulator a €335,000 in November of 2015.
Significantly, this settlement did not necessarily relate to clients’ withdrawal complaints. In fact, though CySEC implied that this was a part of the reason it settled with the broker, the regulator also stated that IronFX was justified in withholding funds from traders.
According to CySEC, IronFX had the right to withhold funds from traders as the complainants had abused the broker’s bonus system. IronFX’s terms and conditions did indeed state that, if traders abused their bonus system, they reserved the right to withhold funds.
In the case of the Chinese clients who withdrew their complaints last month, there is reason to believe that they had abused IronFX’s bonus system. Given their number, it would not have been difficult for them to launch a class-action lawsuit against IronFX - especially as they appear to be already working in unison. This would have made their efforts at getting their money back exponentially easier.
Investors, not consumers
The withdrawal of the Chinese cases follows another favorable court decision for IronFX. In January of this year, the Hungarian high court ruled that complainants from that country were to be defined as investors, not consumers, and were not privy to any European consumer protection laws.
Finance Magnates - A protester against IronFX disrupts the 2016 iFX Expo in Limassol
The distinction between the two is important. European law provides more than ample protection to consumers. Investors lack these protections as the transactions they are engaging in are, inherently, of much greater risk than those undertaken in regular consumer activity.
The high court’s decision also forms a legal precedent to all complainants residing within the European Union. Moreover, the company also claims that this court decision nullifies an unfavorable report on IronFX, published at the beginning of this year by the Cypriot consumer protection agency. According to the company, the agency has no jurisdiction over the company and its conduct.
Another case in the ongoing saga concerning IronFX has drawn to a conclusion. Documents obtained by Finance Magnates indicate that 93 of IronFX's former clients withdrew their claims against the broker in mid-July.
The former clients, all of whom are from China, filed their lawsuits in the Limassol district court in 2015. Just as they had lodged their claims together, all 93 of the complainants, none of whom ever identified themselves to the court, withdrew their claims on the same day.
Little trouble in big China
IronFX’s troubles with Chinese clients can be traced back to late 2014. In December of that year, the retail broker started to receive a number of complaints that it was preventing clients from withdrawing their funds. Earlier in the year, a Chinese broadcaster had aired an investigatory report on IronFX.
The report claimed that the firm was operating in China without proper regulatory approval - something IronFX denied. It also alleged that Introducing Brokers (IBs) Introducing Brokers (IBs) An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s Read this Term) were denied their commissions, that clients could close losing, but not winning trading positions and that deposits, which were supposed to go to European banks, remained in China.
In response to the Chinese broadcaster’s claims, and in support of its initial public offering efforts in 2014, IronFX hired a consulting firm to review the accusations made during the broadcast. According to the broker, the consultants’ investigation found that the accusations were unsubstantiated and no legitimate deposits were withheld.
By July of 2015, the number of complaints against IronFX had ballooned to over a thousand, although some of these were duplicates. To be fair to IronFX, and to put this in some context, the broker has 1.2 million accounts globally, meaning the complaints made up only a fraction of the broker’s client base.
Despite being spread across the world, the complainants all had one thing in common: they all claimed they could not withdraw their cash. Concurrent leaks to the press, which Finance Magnates previously reported, indicated that a total of $176 million was owed to claimants. That figure is now in doubt as, thus far, only $300,000 worth of claims against the broker have been made
Settlement with the Cypriot watchdog
In the same year, an investigation by the Cyprus Securities and Exchange Commission (CySEC CySEC The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision Read this Term) found no definitive proof of wrongdoing but maintained that there were “reasonable suspicions of [IronFX] having committed possible infractions of the Investment Services and Activities and Regulated Markets Law of 2007”. As a result of this, IronFX settled with CySEC and paid the regulator a €335,000 in November of 2015.
Significantly, this settlement did not necessarily relate to clients’ withdrawal complaints. In fact, though CySEC implied that this was a part of the reason it settled with the broker, the regulator also stated that IronFX was justified in withholding funds from traders.
According to CySEC, IronFX had the right to withhold funds from traders as the complainants had abused the broker’s bonus system. IronFX’s terms and conditions did indeed state that, if traders abused their bonus system, they reserved the right to withhold funds.
In the case of the Chinese clients who withdrew their complaints last month, there is reason to believe that they had abused IronFX’s bonus system. Given their number, it would not have been difficult for them to launch a class-action lawsuit against IronFX - especially as they appear to be already working in unison. This would have made their efforts at getting their money back exponentially easier.
Investors, not consumers
The withdrawal of the Chinese cases follows another favorable court decision for IronFX. In January of this year, the Hungarian high court ruled that complainants from that country were to be defined as investors, not consumers, and were not privy to any European consumer protection laws.
Finance Magnates - A protester against IronFX disrupts the 2016 iFX Expo in Limassol
The distinction between the two is important. European law provides more than ample protection to consumers. Investors lack these protections as the transactions they are engaging in are, inherently, of much greater risk than those undertaken in regular consumer activity.
The high court’s decision also forms a legal precedent to all complainants residing within the European Union. Moreover, the company also claims that this court decision nullifies an unfavorable report on IronFX, published at the beginning of this year by the Cypriot consumer protection agency. According to the company, the agency has no jurisdiction over the company and its conduct.