Full exclusive details of Fortress FX Fund ponzi scheme exposed – FinanceFeeds detailed research

 

Editors note: the original article has been modified to make clear that from information available to FinanceFeeds and confirmation from Knight Capital, Fortress FX Funds is a third party fund management service and is in no other way connected to Knight Capital apart from the fact Knight Capital was used to facilitate market access and liquidity. Additionally, please note that Fortress FX Fund being referred to in this article is in NO WAY related to Fortress Prime. They are completely separate entities operating in completely separate sectors.

 

 

Last week, it was brought to the attention of FinanceFeeds that an online fund management service had duped several customers into investing and had operated what appeared to be similar to a High Yield Investment Plan (HYIP) or ponzi scheme, wiping out $10 million in just a matter of a few hours.

The fund management entity, Fortress FX Funds; had encouraged customers to open accounts at Knight Capital Markets, which is very similar to the name of one of North America’s largest institutional trading firms Knight Capital Group which is listed on the New York Stock Exchange as KCG Holdings, Inc. Class A (NYSE:KCG).

It is imperative to note, and FinanceFeeds reiterates, that the entity operating as Knight Capital Markets has absolutely no connection whatsoever with the bona fide Knight Capital Group, and extreme caution should be exercised to ensure that these two very different entities are not confused.

Since reporting last week that Fortress FX Funds had been peddling its services on prominent FX portals such as myfxbook and ForexVerified, and finding out from a series of introducing brokers (IBs) in various geographical locations and claims by traders that this particular company had established a ‘broker’ in the name of Knight Capital Markets and offered managed FX portfolio services through a different entity called Fortress FX Fund, it is claimed that these are the same entity.

FinanceFeeds has contacted several traders and introducing brokers that had been on the receiving end of this scheme and have lost, in order to investigate the structure behind the scheme and how it worked.

FinanceFeeds also launched an appeal to introducing brokers, referring agents and clients in order that they may be assisted in getting to the bottom of this matter.

Who is behind it?

According to a longstanding introducing broker who is close to the matter and has specifically requested to remain anonymous, an individual called Ethan Cooper, who claims to live in Butschwil, Switzerland.

A very brief search on his performance as a fund manager will return some interesting figures, including a claim made in October this year, in which he states that he is based in Sydney, Australia and has made a 1,624% return on FX managed account trading.

Once the pigs stopped flying around an azure blue moon on the eighth day of the week, it became clear that this is not really the case.

Can you get your money back? 

Importantly, it has been explained to FinanceFeeds by several investors who paid their deposits by credit card that these may be recoupable by contacting the bank, who will in turn resolve this via the protection offered by merchant services companies (Visa or Mastercard).

In these cases, banks are treating the matter as a case of ‘failure to provide goods or services’ which means that the credit card company will likely reimburse most customers that have paid by this means.

The major difficulty comes in the form of retreiving funds deposited by bank transfer, a matter which hits IBs who have been paid by credit card by their customers, and then deposited the funds by bank transfer in one bulk amount to Knight Capital Markets.

It will unfortunately be a great deal more difficult to retrieve these monies without litigation.

Here is what was uncovered by our investigations

1. Fortress Fund (FF) advertised itself as a fund manager accessible by opening a trading account with Knight Capital Markets (KCM), which styled itself as a foreign exchange (FOREX) trading brokerage.

2. On opening an account with KCM there was no information whatsoever about trading with any other fund manager on the same brokerage and many traders were not given any options or even given an opt in form on account opening. There is no information at all about any fund managers on the web site and this can be verified on www.knightcapitalmarkets.com.

3. Many traders did not sign any document such as a Limited Power of Authority (LPOA), which is industry standard to authorize third party trading, for legitimate FOREX brokers, authorizing FF to trade the funds to be deposited with KCM.

4. In reply to an enquiry by one particular trader about trading with FF, an email dated of 18/10/2015 stated “your trading account is already automatically connected to Fortress Fund via the Knight application process” despite the client not having signed a LPOA.

5. A trader was only given “investor” password access to my trading account, therefore was unable to close trades on his own. – (warning sign – ed)

6. KCM has been blocked from receiving further funding through Visa and Master Card, no doubt through concerns raised about the group running KCM and FF.

7. FinanceFeeds has been provided with a trading statement by the bank of a client that shows that at 1647hrs on 22/12/2015 a client’s account balance was $3989.41 with a floating profit (open trades) of $6862.71 giving total account equity of $10,853.12. This particular trader was unable to close these trades manually to realize the profit because he had not been given a trading password to his account despite not having signed an LPOA to give FF full control of my funds deposited with KCM.

8. FinanceFeeds has been provided with a trading statement that shows that by 0945hrs 24/12/2014, a client’s account was left with a negative equity of -$3524.22 due to the deliberate failure of FF trading without authority on his account to close profitable trades the night before. The “losses” were apparently contrived as there is no reason any reasonably competent fund manager would not close trades in profit and wait for them to go into negative equity unless through larcenous intent. At this point the trader had enough time to log in and view his account then save the statement, and could have easily closed all the trades, with net gain, if allowed, so the events cannot be accounted for by rapid swings in currency rates.

9. A further trading statement shows that between 23/12/15 and what seems apparent is KCM have re-written the “trading log” and entered a series profitable trades (which were not on B) made to look like they were done in the past, from 17/12/2015, to magically shore up the account balance to $2.00 then added $300 they termed “negative equity protection”. Such blatant falsification of the “trading” record, in the opinion of the trader concerned, amounts to false accounting and renders the record invalid.

10. An email provided to FinanceFeeds which was sent to KCM on 30/12/2015 shows that when a trader challenged KCM about this suspicious activity on his account which resulted in apparently contrived “losses” in their favor, through a fund they automatically allowed to trade his account, without due process, they stated “The suggestion we are responsible for poor trading on your account by a 3rd party is ridiculous.”

11. It is claimed by a series of traders that have contacted FinanceFeeds that FF and KCM are the same group of persons acting in collusion by manipulation of the trading platform. On this basis, one particular client has written to his bank to explain that his view is that KCM and FF had sought to deprive cients and other depositors of their funds therefore KCM did not act as an honest broker and did not provide the service of a legitimate FOREX brokerage that he had paid for, and has asked the bank to fight his case and attempt to recover his initial deposit of $3000.00.