Polish retail brokerage company XTB has come under fire for recent client accusations ranging from fraud to blackmail. Both XTB and one of its largest clients, Krzysztof Kramarczyk, have dug in, each alleging the other party’s wrongdoing. The debate constitutes the latest development for XTB, which has been under the supervision and investigation of Polish Financial Supervision Authority (KNF) since last year.
Kramarczyk had been an active client of XTB since 2013. During this time, he quickly became one of its most active customers – in 2014 alone his trading reflected almost 5 percent of XTB’s total retail turnover. In doing so, Kramarczyk claims that he was being purposely singled out by XTB, experiencing routine disruptions and throttled response times from XTB’s system.
Since 2013, Kramarczyk has certainly been one of XTB’s most active clients. His trades consisted of frequently buying and selling financial instruments over extremely short intervals. In larger orders such as the type Kramarczyk engaged in, even small changes in prices on financial markets had amounted to high profits over the long-term.
According to Kramarczyk, these profits quickly dried up after his first year in trading, which was when he experienced a wide range of issues with XTB. He alleged that the system was prone to periodic ‘hang ups’, contributing to sizable losses that eventually swelled to PLN 3.5 million ($1.02 million).
Moreover, Kramarczyk also claims he was stonewalled by XTB, with his reported problems falling on deaf ears. He also alleges that an XTB employee disclosed to him that his transactions were being watched and purposely slowed down. This served as the primary impetus for Kramarczyk’s plea for compensation from the brokerage.
According to a Money.PL report, a KNF analysis cited that XTB held the terms of the transaction at unfavorable rates for customers, thereby increasing its own income. Officials at the authority also indicated that over 220,000 orders were delayed by XTB. Kramarczyk claims to have gained access to these documents from the KNF, which in his mind has strengthened his resolve to seek mediation.
XTB pushes back
For its part, XTB released a statement today strongly condemning the allegations while also pushing back against Kramarczyk’s claims. Back in October 2017, the Management Board of X-Trade Brokers Dom Maklerski S.A. had filed a criminal complaint with the District Prosecutor’s Office in Warsaw against a client’s unlawful threats.
Liquidity Constraints in 2021 – What is the Best Path Forward?Go to article >>
XTB has refused any compensation for Kramarczyk’s losses and has reiterated its disagreement with the previous remarks of the KNF. In addition, XTB had submitted extensive substantive and legal reservations as well as detailed analyzes, shooting down the validity of Kramarczyk’s comments in the report after the inspection.
According to the statement released today, “The client, within the last 4 years, repeatedly blackmailed the company with a threat of destroying its public image, expecting a payment of PLN 3,5, 7 and at last 14 million.”
Consequently, the Prosecutor’s Office initiated proceedings in response to actions by Kramarczyk back in February 2018. This included multiple unlawful threats against XTB’s executives as well as several attempts to extort money. According to XTB, despite the proceedings initiated, Kramarczyk has continued its unlawful threats against the brokerage by blackmailing its executives.
XTB strongly denies the claims made by Mr. Kramarczyk – this stance was echoed in its statement today:
“The client’s claims are totally unfounded and the losses sustained by the client were solely due to the client’s bad investment decisions, as unequivocally demonstrated in the presentation during the Financial Supervision Authority’s inspection in 2016, in later documents provided to the supervisor, as well as in the expert opinion prepared by the independent consulting firm Roland Berger that analysed the client’s transactions and investment decisions. The analysis confirmed that the client’s transactions were not delayed, and the execution time of his transactions was faster than the average for other clients.”
Ongoing legal hassle
While both sides have made their cases crystal clear, it has fallen to XTB to do most of its explaining. An investigation by the KNF has been ongoing since last year. Back in November 2017, a determination was made by KNF and the Prosecutor’s Office, following a lengthy probe. Polish authorities had determined that the brokerage fraudulently engaged in a series of client infringements to the detriment of its client base.
The KNF estimated this to be in the range of PLN 8 million ($2.3 million) to upwards of PLN 23.5 million ($6.8 million). At the time, XTB’s Management Board categorically denied the KNF’s assessment, noting to Finance Magnates that: “we do not agree with the objections by Polish Financial Supervision Authority (KNF). Since that control, we have submitted to KNF extensive substantive and legal objections as well as detailed analyses, pointing the remarks in the audit protocol are groundless.”