Impostors pretending to help victims of FX and binary ‘fraud’ effect chargebacks. Customers beware!

Companies are starting to surface that charge fees for purporting to effect chargebacks. They have massive connections with the Israeli b-book and binary options sector and are simply there to take $750 from customers.

USD cash money

The past ten years has been a difficult period for the retail investor globally, largely because despite the vast range of extremely high quality tradeable assets available via increasingly advanced trading platforms offered by top quality and well established brokers with finely honed relationships with live liquidity providers in major financial centers, the ghastly shadow of binary options did more than muddy the waters.

Binary options, a largely fraudulent ruse by Israeli companies whose founders came from gambling, lead recycling and affiliate marketing backgrounds, devoid of any experience or interest in genuine financial markets activities in bona fide jurisdictions, was designed very cleverly to mask a closed system weighted in favor of the house as a financial product whilst lead lists from poker sites owned by the same entities were recycled and in many cases stolen, in order to fleece those who had lost money gambling into ‘investing’ often via extremely forceful boiler room style sales tactics.

Some high profile marketing, often at the expense of the uninformed, ensured massive branding and presence everywhere, especially among average investors who have been taken for a ride globally, with little recourse.

Now, whilst hundreds of thousands of victims lick their wounds to the tune of tens of billions of dollars, in many cases reaped illegally in nations such as the United States where the solicitation of off-exchange binary options is a federal felony, the entire binary options ruse is coming to an end, however its perpetrators continue to run roughshod over everyone, simply urging the corrupt Israeli government to allow them to prevail untouched under a different label, hence most simply sat tight whilst the proposals by Israel’s regulators to hold them to task blew over.

As with many large and well designed frauds, a ‘fringe industry’ appears to have developed alongside it.

FinanceFeeds has become aware of several attempts by equally despicable entities promising to recover funds stolen by binary options companies, largely playing on the possibility that those who handed over their cash to the binary options call center staff who call themselves John or Steve, yet have Mediterranean accents and a poor command of the English language on the false pretense of investing in a market which clearly never existed, would be equally keen to hand over money to someone with no provenance who promises to get it back.

Mostly, no research into these firms is done, because if it was, nobody would deposit, so therefore the same applies to false law firms and bogus recovery agencies and their approach, many of which have connections to binary options brands. Quite simply, they will take your money and run.

Today, a further and perhaps more toxic example of this has made its presence felt.

Operating as firms promising to help resolve frauds, a website has emerged and is approaching ancillary services providers to the FX industry, as well as advertising its services to unsuspecting victims of binary options fraud.

The site of one particular firm states that the company is based in New York, and has a range of telephone numbers for other regions of the world that are synonymous with retail financial services, as well as with a large population of holders of Visa and Mastercard based payment methods.

Promising to help victims of online trading scams recover their funds via assisting to effect chargebacks from merchant services firms such as Visa and Mastercard, this represents a third party which really should be considered with great care.

This particular entity was brought to FinanceFeeds attention by an FX industry consultancy, who also was unaware that it would potentially be an impostor.

FinanceFeeds is aware that most of these entities are based in Israel, and are closely related to exactly the same fraudsters that they claim to rebuke, expecting people to hand over a fee for something they could more effectively do themselves.

On approaching one particular firm, which is layered in such a method that it has a shell company in New York, a common practice among Israeli firms wanting to avoid any legal probing, a matter discussed at length by former US secret agent Haggai Carmon who said that the way that binary options fraudsters structure their businesses, that being shell companies providing services to other shell companies, entities in various offshore jurisdictions owned by entities that are holdings companies and then using a series of smoke and mirrors to deflect the authorities and any recourse reminds him of “a sophisticated espionage or terror organization.”

When FinanceFeeds asked this particular chargeback company why they are registered in New York when we guessed simply by looking at the service that they provide that they would very likely be Israeli, the answer was “That is the owning LLC in America” to which FinanceFeeds explained “That’s a layered company, basically masking the Israeli origins of the firm.”

The answer received to that was “We have our brand and we have our structure.”

FinanceFeeds then asked how a third party firm of this nature could be more effective in gaining chargebacks than a direct chargeback from a Visa or Mastercard customer, when such companies have contractual agreements with the holder of a specific card.

“That’s a good question” replied the firm. “Largely the answer is that both the customer and the issuing bank are at a loss as to how to present and process an authorized transaction at a brokerage type merchant, and the customer does not present the case effectively, but back to your question, the issuing banks are indifferent and largley incompetent when it comes to service related disputes.”

Are they? Chargebacks are feared tremendously by binary and unlicensed b-book FX brokerages and white labels, largely because of the effective means by which they are conducted and that the merchant services provider will often chop their relationship after a few chargebacks have taken place. FinanceFeeds has been aware of several cases in which payment service providers (PSPs) have explained this categorically, which has given rise to the practices which were adopted by companies such as PacNet and its subsidiary Counting House which provided service to binary firms among others, and landed it in serious trouble with the US Treasury which has branded it a criminal organization.

Our experience denotes that many third party firms of this nature charge fees to promise the return of cash to victims.  FinanceFeeds asked this particular firm’s representative in Israel how much is charged, and the response was categorically typical.

“We invoice them if we’re successful” was the initial response, which was not considered credible by FinanceFeeds. After some further probing, it transpired that the firm charges an up front fee of $375 to take a ‘case’ on, which the company’s representative said is payable ” upon signing a contract which is based on New York State law”. That is odd, considering that intrinsically this is an Israeli company, being operated from Israel and the entity in New York is a layer.

“Once the $375 is paid, we process the documents and give them back the file, and then charge the second $375.”

That is $750, which is a lot of money to pay for a service that has absolutely no grounds upon which to make a successful chargeback. The representative further explained “That 750 is deducted from the 25% recovery fee (if successful). That is the general model. We hold their hand through the whole 3-5 month process.”

This actually means that $750 is taken, and if the chargeback is not successful, then the customer is $750 out of pocket. One has to ask, how can a third party involve itself in a contractual agreement between the holder of a credit card and a company to which the holder sent funds?

We did indeed ask this question, the reply to which was “We are – and have to be – the exact opposite of the brokerages. We don’t guarantee success, we don’t use fake names, we are not offshore (despite pretending to be in New York whilst operating from Israel – Ed) and we are prepared to go to war for them. They’re giving us an incentive to do so.”

“The issuing bank is interested only in the parties of the transaction ie. the consumer and the merchant. Visa and Mastercard do not allow for 3rd party services to get involved directly if the bank rejects it” admitted the representative.

“We contact the bank with the client. The consumer can give authorization to a friend, financial advisor, associate – to help on the phone. We do that and we help get them through the 1st door. Is it guaranteed? No, it’s up to the person that we contact at the issuing bank – who’s dog could have died yesterday and could just give us a headache, but we’re good at it and we escalate it if necessary.”

When asked what that rather unusual analogy meant, the representative said “I mean the bank representative. It is subjective, we have the same file.”

When asked if this particular representative had ever worked for a binary or FX firm, he asked that we go off record. “Do I have to type like a maniac to keep up with your questions?” he said. “Man you are suspicious.”

“OK, but it’s a bit off putting” he said. “I’ll give you an example. We give a chargeback file to submit to a customer’s bank. He is charging back on his debit and credit card from the same bank. The debit card department rejects the charge back, and then the credit card department accepts it. This is the same chargeback file at the same bank, but was processed by different bank representatives. Issuing banks are different.”

This simply means that $750 in fees advances the cause of nothing, as the third party company has no jurisdiction or power of attorney over the credit card account holder’s relationship with the bank, has not been party to the contract with the binary options firm that the funds were transferred to by the card holder, and does not have a relationship with any senior bank officials, instead simply going alongside the customer to talk to the telephone contact centers which will offer the same canned response.

The representative stated “RBS head of dispute department said “We are not processing chargebacks against binary companies”.

FinanceFeeds then asked that if that is the case, how can a third party intervene if that is their policy and the account is held by the owner of the card.

“With RBS, maybe we can’t” he said. “However, with every other bank we can. RBS (we think) might have a big conflict of interest but again – it’s an example of the craziness inside this world.”

“Again, the client sees it with us. They can’t believe the bank reps do this, so we push and push but sometimes the bank reps are just either 1) stupid 2) indifferent 3) negligent.”

“We heard it from Visa too in Palo Alto. The head of Risk or someone high up he said, the Banks are idiots!”

(I wonder if this is the stuff of chat forums, because having spent 27 years of my career working with technology divisions of large banks which connect live markets and institutional processing channels via large commercial networks, I have never heard a senior executive publicly or privately make such a remark – Ed.)

“We do everything we can to get it processed correctly – and acted upon in the required time frames. An example of this is that the brokerage files a representation, and the issuing bank takes the money back from the provisional credit, then apologizes to the client, yet doesn’t give their own customer a copy of the what the broker said. The client has rights to appeal it, so we get the client to get it, which means that the bank reps…they are almost dumbfounded they have access to the representation.”

“So it’s a broken system…bottom line…but we’re good at it. I guess if the banks did their job – we wouldn’t be in business…but that’s like a lot of things….people hire accountants to do taxes. We know the Visa/Mastercard terms & conditions very well and we know the process well so we fill a need for these victims. When the money goes back to their account they pay us gladly.”

When asked by FinanceFeeds if he had worked in an Israeli b-book firm or binary firm, he said that he had done so.

This is something that is well worth paying attention to, and indeed, in our opinion, worth avoiding.






Read this next

Institutional FX

PrimeXM reports lower volumes for July as summer lull bites

PrimeXM has reported weaker trading volumes for July 2022, in line with other institutional and retail platforms that saw the activity of their clients dropped compared to a month earlier.

Retail FX

FCA warns of ATFX Global Trading / ATFXcoin

In its latest clampdown against the specific type of ‘clone fraud’, the Financial Conduct Authority (FCA) has warned local investors to watch out for a company called ATFX Global Trading / ATFXcoin.

Digital Assets

CME Group to roll out options on Ether futures next month

Derivatives exchange CME Group is set to roll out options on Ether futures on September 12 in a move to bring another level of diversification to cryptocurrency traders.

Industry News, Podcasts

Finance Feeds launches Podcasts: Listen to Ep. #1 feat. Dmitri Galinov of 24 Exchange

The team at Finance Feeds are happy to announce the launch of our Podcast series, available on Spotify and other audio services and hosted by our Editor-in-Chief Nikolai Isayev.

Digital Assets

Madfish launches Yupana.Finance, the first lending protocol on Tezos

Yupana, which aims to provide a similar experience to Aave or Compound, currently supports TEZ, cTEZ, kUSD, tzBTC, uUSD, and uBTC.

Industry News

SEC charges barred broker Anthony J. Mastroianni with $1.2m fraud targeting elderly

Instead of using investor monies to generate income, Mastroianni withdrew over $486,000 of investors’ money from his firm’s bank account and used ill-gotten funds for personal expenses on luxury items, the SEC alleged. 

Digital Assets

Unizen names crypto veteran Michael Healy as chief strategy officer

CeDeFi exchange Unizen has onboarded crypto industry veteran Michael Healy, who originally worked for Wikileaks and built their android application in 2010, as Chief Strategy Officer.

Institutional FX

Sterling Trading Tech adds FX and Crypto to risk and margin system

The Risk-as-a-Service solution provides supports FX spot, forward, and swap trades and positions, in any currency pair, as well as Crypto including crypto priced in any currency.

Interviews, Metaverse Gaming NFT

Exclusive: Wayne Marcel explains FIO Protocol amid fight against fraud on NFT markets

It’s been 12 years since Satoshi Nakamoto released the white paper that introduced Bitcoin to the world.