The HR startup. Deel has suspended payout services to several prop trading companies after it came under the radar of US commodities regulator for its links to My Forex Funds, which is facing fraud charges.

My Forex Funds Fiasco Highlights Deel's Dealings

According to a tweet by Bespoke Funding's CEO, Lewis Kaler, Deel is under investigation by the CFTC and has paused payouts to prop trading firms. An executive of MyFundedFX, another prop trading firm, confirmed on Discord that the platform will be "unable to process payouts through Deel" for 24 to 48 hours as the HR startup has initiated an "industry-wide compliance review."

An official announcement in regards to Contracts, Payouts & KYC has been made in our discord today.🚨

This comes after Deel has been taken under investigation & paused business with their clients.

Join the discord to stay updated.👇🏼https://t.co/oIYv7JKCAY pic.twitter.com/ZPScn18Zw6

— KalerBFP (@KalerBFP) September 11, 2023

The links of Deel and the crypto exchange, Coinbase to the allegedly fraudulent prop trading firm, My Forex Funds, surfaced publicly last week following a report by The Information. Deel, which prop trading firms use as a conduit for financial payments, alone facilitated more than $72 million in payouts for My Forex Funds in less than a year.

Before charging My Forex Funds with fraud, the Commodity Futures Trading Commission (CFTC) subpoenaed Deel and Coinbase for information about payments made by them towards the prop trading activities of the tainted company.

San Francisco-headquartered Deel made over 40,000 transactions to transfer a hefty amount to My Forex Funds. According to the CFTC, the HR startup served 15,664 My Forex Funds customers.

"This is a very small activity for us, less than 1 percent," an anonymous senior executive from Deel told Israeli media Calcalist. "We didn't know it was a problematic industry, and all the tests we conducted for them were normal. When we were informed that it is a problematic industry, we immediately ceased working with it."

Prop Trading Businesses under Scrutiny

Prop trading firms fund traders, experts or rookies trade on live markets and then share the profits if there are any. In exchange, the companies charge fees, which come in many forms, including taking the qualification challenges and even the monthly fees.

As these firms do not handle clients' monies directly, at least ideally, they bypass the stringent regulatory oversight like that on retail brokers. Now, the CFTC's action against My Forex Funds has raised questions on the operations of all prop trading firms.

"We are a platform, and if companies meet our conditions, we have no way of knowing if it is a Ponzi scheme," the executive from Deel added. "If the CFTC states that it's a problematic company, we immediately freeze its activity with us. We collaborate with the CFTC and comply with all their requests and needs. We will examine each of the prop trading companies to see if there could be a problem, and if found, we will cease working with them."