Two IronFX principals to be prosecuted in court by Chinese government today!

Two IronFX principals to be prosecuted in court by Chinese government today!

Today, at the Shanghai Pudong District Court, IronFX officials were subject to commencement of trial for what China considers to be an “illegal trading platform” and for the willful damage done to Chinese introducing brokers and investors

Exclusive court information provided to FinanceFeeds details that IronFX owes 33 million RMB to Chinese retail clients involved in this current case. Many which did not complain have simply written their losses off.

Controversy has surrounded retail FX brokerage IronFX for quite some time, both from an industry perspective, a client relationship perspective and a regulatory perspective.

Some three years have passed since the now notorious nature of the large Cyprus based company began to make its presence felt in the shape of extremely harsh treatment of employees, failure to pay over $176 million in customer withdrawals globally, an unpaid tax deficit of over $1.6 million to the Cyprus government, and numerous allegations and documented evidence of corruption which have led to the firm being allowed to continue to operate despite its reputation damaging presence on an island which is now a mainstay of all things FX.

The leeway that has been extended to IronFX is gargantuan in size and not justifiable, however that is now coming to an end as two principals of the company are now the subject of having had their collars felt by the long arm of the Chinese government.

The Chinese government places a very strong emphasis on social stability, and has very little tolerance toward firms from overseas abusing the lack of jurisdiction that China has outside its own borders, however IronFX’s blatant and widely publicized mistreatment of introducing brokers, direct retail customers and partners in China which has now resulted in a mistrust of all brokerages that attempt to enter the Chinese market, is too much to ignore.

Chinese introducing brokers in many towns and cities across China are well organized and often large entities, many of which handle over $300 million in client assets and operate portfolio management and multi asset trading facilities, and are relying on relationships with overseas firms in order for such firms to perform the dealing and liquidity aspect of the process, whilst the introducing broker conducts the client facing activities.

These firms are dependent on trusting overseas companies with their client assets and dealing practices, because there is no method of checking from within China, hence any shade of doubt means absolute conservatism takes precedence, and all other firms could lose their important Chinese order flow to a burgeoning domestic Chinese FX industry which is now setting itself in place for domestic market domination from bank level downwards.

The firms that are successful in China with regard to introducing broker relationships and cross-city market penetration are those with hosting, liquidity provision and full facilities inside China, such as Saxo Bank, Advanced Markets, Blackwell Global and BMFN. This has become accentuated over the past three years not just because of the continued advancement and detailed understanding of this industry by Chinese executives, but also because of IronFX’s damaging practices and high profile media presence to that effect.

China had to respond to this, as its Communist Party has to maintain a public image of addressing matters that affect the public, and as a result, the government took taking two IronFX principal officers, Han Xinghui and Sie Yong, to the Shanghai Pudong District Court today, at 1.45pm, with a full webcast of the trial having been published on the Chinese court government website.

Amassing law suits in China were one of the factors which added to FinanceFeeds’ correct analysis that last year’s noise by IronFX in which the firm had made ludicrous claims of entering into a merger with ailing retail brokerage FXDD via a mergers and acquisitions deal with Nukkleus which is owned by major FXDD shareholder, racing driver and Tradition senior executive Emil Assantato.

FinanceFeeds has embarked on extensive research into the matter and can categorically confirm that there is no proposed merger between the two companies, and neither will be listing, singularly or via a merged entity, on NASDAQ as a public entity.

The many reports which emerged, most of which were PR noise, were not researched in any detail thus the filing which was made to the Securities and Exchange Commission (SEC) in the United States which detailed that IronFX CEO Markos Kashiouris, as well as company lawyer and IronFX shareholder Peter G Economides, and Efsthasios Christophi, a further director of IronFX have joined the board of directors of Nukkleus which is owned by New York-based racing driver and FXDD major shareholder Emil Assentato.

Chairman of the North American division of Swiss interdealer broker Tradition, Mr. Assentato is a major shareholder of FXDD, and any claims by any parties that FXDD and IronFX would merge as a result of the interest in IronFX showed by Mr. Assentato were dispelled following FinanceFeeds discussion with FXDD senior executives on the matter.

It was made clear to FinanceFeeds by FXDD that whilst Mr. Assentato is looking at other investments and potential strategies, FXDD itself at this point is not merging with anyone.

FinanceFeeds spoke to senior executives who are privy to commercial information surrounding a filing that was submitted to the Securities and Exchange Commission (SEC) last week, as well as a previous filing stating that both entities were considering methods by which they could consolidate operations and potentially list, however this has gone nowhere.

At that time, FinanceFeeds also reported that the proposed merger between Nukkleus and certain assets of IronFX may not go anywhere either, as FinanceFeeds has obtained official documents relating to the proposed merger that state that IronFX has pending lawsuits and an outstanding tax liability, another matter on which our research proved to be correct, as this has now collapsed, the US authorities having confirmed so.

On June 3, 2016, the Securities and Exchange Commission, whose approval would be required in order for Nukkleus to proceed with any acquisition of IronFX assets, was made aware in writing, and has subsequently included in the regulatory documentation relating to this case, that IronFX Global Limited is a party to the civil actions no. 204-368/2015 pending before the District Court of Limassol.

The said civil actions were filed by Chinese clients of the Company on 22 January 2015. The said clients who have been identified as abusive traders are claiming against the Company damages for breach of contract for the total amount of $1,258,457.30.

It should be noted that the clients filed their statement of claim late in 2015 (more than 10 months after the proceedings were filed). Early in 2016, 72 clients out of 165 sent instructions to their attorney to withdraw the proceedings they filed against the Company. The total amount claimed by the clients who have sent such instructions amount to $564,849.54.

The SEC is also aware that IronFX Global Limited reached a settlement with a major institutional liquidity provider following proceedings that were issued as a result of the SNB event of January 2015 by virtue of which IronFX agreed to pay the liquidity provider the amount of £2,500,000 in twenty five equal instalments of £100,000. The remaining outstanding amount stands at $1,575,000.

Additionally, IronFX has employment-related tax obligations with the Cyprus Tax Authorities of approximately $1.6m, including a tax settlement agreement, which is also an aspect that the SEC has knowledge of.

Bearing these matters in mind, it is very unlikely that the SEC will ever allow this transaction to proceed, let alone any reverse takeover and public listing.

Public relations, increasing brand awareness and attempting to rectify a tarnished name by going down the route of associating said brand with the ability to list publicly on NASDAQ is a completely different thing to actually being able to successfully do so, bearing in mind that thus far, absolutely no retail FX firms have listed on NASDAQ.

In late 2014, IronFX issued a press release stating that had intended to file an initial public offering (IPO) in New York, with a view to raising $800 million, however whilst this was published in the Wall Street Journal as having been a confidential filing, it did not proceed.

Noted within the IPO documents at the time was a series of important points with regard to the business model employed by IronFX, largely points which have been at the center of very high profile reports in many media sources across the world, including terms and conditions which label clients as abusers of bonus conditions, alleged non-payment of introducing brokers in China, and an internalization of over 90% of all order flow.

As far as any aspirations toward listing on NASDAQ are concerned, the admission rules are very stringent indeed. Even if the SEC permits the merger between Nukkleus and IronFX, any admission of a pink sheets-listed firm that has merged with a firm that has ongoing lawsuits and unpaid tax obligations is very unlikely.

IronFX’s noise and corporate barbarism has been the bugbear of many in the retail industry recently, and despite CySec’s impotence and the firm’s ability to influence government officials and mainstream media, it appears that China’s grip is now tightening.

FinanceFeeds will endeavor to update this matter on the outcome of the court case once it concludes.

#China, #cyprus, #FX Brokerage, #ironfx, #Shanghai Pudong District Court

+ Read This Next

Industry News, Retail FX

Exclusive: IronFX client group files three petitions with the European Parliament, Markos Kashiouris faces criminal lawsuit

Three petitions have been sent to the European Parliament against IronFX, two from Hungary and one from Italy, and the European Parliament has responded with a letter to all members with a status and proposed action in investigation. Congruently, CEO Markos Kashiouris and two German account managers are now the subject of a criminal investigation by the Munich prosecutor

Industry News, Retail FX, Week in Review

IronFX still conducting aggressive marketing with massive b-book bonuses, even though it owes $176 million in client withdrawals. Why?

IronFX is aggressively targeting IBs and traders across the world with non-withdrawable 100% bonuses, and time-specific, forceful marketing campaigns, alluding to the B-book model that created their notoriety. Why is this allowed when the firm owes global customers their withdrawals, and considering CySec’s instruction to desist from bonuses?

Industry News, Retail FX

Key Chinese IronFX employees and representatives scared to speak out on Chinese IB withdawal issue even one year after leaving company

Two years have passed since IronFX became the subject of high profile allegations that it was not paying IBs, affiliates and clients in China, yet still the firm operates, and monies are still owed. FinanceFeeds has found that employees of the firm who left the company a long while ago and are privy to vital information are far too afraid to step forward, even now.

Industry News, Retail FX

Why does the FCA tolerate IronFX subsidiary 8Safe when it makes a loss, employs only 3 staff, and has €17 million in liabilities?

IronFX’s continued operations without any substantial regulatory censuring despite non-payment of $176 million in client funds, class action lawsuits and a 1.6 million euro outstanding tax liabiliity is beyond reproach. FCA regulated subsidiary 8Safe also has liabilities in excess of its ability to cover, and employs only three people. Why do European regulators tolerate such danger to client funds and the FX industry’s reputation?