NADEX, Self-Regulated Safe Broker
NADEX has provided an example of how a broker, and exchange and the binary options should operate; self-regulating. The exchange has recently banned a husband and wife team found guilty of operating a money-pass scheme. Money-pass, a practiced deemed unethical and illegal by NADEX and regulators, is a fraud in which equal and offsetting trades are placed in two accounts simultaneously for the purposes of transferring funds from one account to another. Typical perpetrated by black-hat money managers this one was operated by James Groves and his wife Georgiana Chiuc.
Groves, posing as a practiced and experienced NADEX trader, executed trades with high probability of loss in client accounts while his wife place the opposing trades at the same time. By using off-sized lots and simultaneous execution trades the pair were able to evade detection by the designated market maker. It was the compliance department that uncovered the fraud. Compliance officials noticed suspicious trades in the accounts of two of their members. The department then contacted the owner of the losing account to inquire into the nature of the trades. The clients response was that they had let Mr. Groves take control of their account and trade for them, a revelation that led to further inquiry.
A panel of NADEX officials found that a total of 28 trades had been placed for a total of 1,451 contracts. Ms. Chiuc’s account benefited a total of $43,238.90, all of which is to be returned as part of the settlement. The pair has been banned from NADEX for life, fined $500 each and forced to return the ill gotten gains in restitution. No word on further charges or civil penalties. Click here for the full NADEX review.
The Neil Pecker Scandal Expands
In an extension of the Neil Pecker scandal reported on a few weeks ago. In that scandal Neil Pecker and Vision Financial Partners were fined more than $6.5 million in fines and disgorgement following the unraveling of his scheme. Now the CFTC has fined Westward and Coucarin nearly $2 million in fines and disgorgement of lost funds for their part in the fraud. The two are not charged directly with defrauding clients but have been found to have provided no legitimate services or interest to client accounts. Westward and Coucarin are both holding companies which received funds diverted from Vison Financial’s client accounts.
It’s Not All Bad News
Technology provider TechFinancials, the binary options industry only publicly traded firm, recently reported earnings. The company reports a 57% increase in year over year revenue which resulted in positive operating profits. Full year 2016 operating profits totaled just over $5 million, versus a loss of $0.10 million in the prior year. Software licensing saw an increase of 22%, led by a 117% increase in platform revenue. The downside is that going forward there will be a sharp decline in platform revenues due to 24Option’s choice to provide it’s own technology.
The silver lining is the advancement of Asian joint-venture DragonFinancial. DragonFinancial is operating in a number of Eastern markets and producing nearly $9.5 million in annual revenue for the company.
Asaf Lagav, Techfinancials CEO – “Going forward we expect 2017 will be challenging due to the loss of our largest customer and the uncertain and tightening regulatory environment particularly in Europe. We anticipate these regulatory changes will have an impact on the B2B performance for the rest of 2017, both on its revenues and on earnings,”