GUILTY Case# 2012-056 | Kovacs Norbert vs fxopen.com

[zlion]

I have "enjoyed" similar action from another broker (Instaforex), smaller lost ($300), but on smaller deposit too ($1000). It was the same story, they erased the cheated trade from the trading history. I went to another boker (Admiral Markets) and now live happy.

 

[FXOpen NZ]

In this case, the functioning of FxOpen's ECN model is critical to the issue at hand. I'd be more than happy to discuss ECN functionality elsewhere, but there's no way to exclude some talk of it from this conversation.



Possibly true. This overlooks the ethical issue of allowing a rogue LP to wreck a client's trades.



If the errors are accidental, I'd be 100% behind you. Per statements from FxOpen in the Scam Alerts folder, the errors were NOT accidental.



Laudable, but insufficient considering the actions of the LP in this case.



I'd be much happier of FxOpen had said "We are taking steps to change NDAs so that FxOpen no longer protects LPs that use cheap bucketshop tactics against our clients" instead of hiding behind agreements that do nothing to protect a client from these sort of tricks.

Funny how many other brokers brag about who their LPs are.



A client of FxOpen got screwed out of profits due to the deliberate unethical actions of an anonymous LP. FxOpen hides behind it's own TOS and an NDA. The client is rightfully unhappy and complains in public.

Based on this, FxOpen is threatening to SUE.

I consider this threat alone enough reason to recommend against ever doing business with FxOpen. I strongly suggest that FxOpen immediately withdraw this threat.

Why not just insert an item in your TOS stating that unhappy clients surrender all rights to ever complain in public?




Technical glitches or deliberate acts of the LP? Let's see what's been said about this elsewhere:



So LP deliberately injected quotes to "attract liquidity". Were these prices ever real market prices?



Looks like the LP was providing "non market quotes". Sounds like false prices and cheap bucketshop tactics to me.



Nice, just slap your client in the face while you're at it. Is "service with a snarl" now FxOpen's policy for dealing with unhappy clients? And you've got the nerve to accuse him of "black PR".



Once again, had this been a simple technical glitch, then FxOpen's actions would have been 100% correct. Then again, even if this had been a simple technical glitch, threatening to sue because a client was made very unhappy by it is one of the absolute worst customer service moves I've seen in a very long time.

Since it appears that FxOpen has clearly admitted that an LP was acting not just as a market maker, but was deliberately providing fake prices to lure traders in, the client has every right to be unhappy. He also has every right to let other traders know what happened.


My recommendations if FxOpen wants to try to restore their reputation:

1. Withdraw any legal threats immediately.

2. Begin negotiations with their LPs immediately, with the goal to end NDAs within 1 year. Other brokers brag about their LPs. Considering what happened, FxOpen should seek full transparency if they want to call themselves an ECN.

3. Offer Kovacs some reasonable level of compensation and a proper apology for what happened to him.

Dear Pharaoh,
With all my respect to You kindly read following without emotions and try to understand our position based on the facts and business terms.
:
1. The company has not broken any paragraph of the service agreement (agreement which Client signed and accepted)
2. The Company took over the losses on the given transactions, which resulted from the execution trades on the account of the Company at the Liquidity Provider. Please be aware that The company has never claimed that one of our Liquidity Providers changed the results of the transactions. In our letter the following was written to the Client: «In reply to your enquiry, please be advised that due to the technical problems experienced by us on May 16, 2012, some trading orders were executed at the prices not existing on market at that period of time. The origin of these problems was that we had been receiving the erroneous prices from one of our Liquidity Providers...» Therefore the Company reported that the prices supplied by one of our Liquidity Providers were not by market. The system blocked these prices and they did not fall into the Depth of Market - it is clearly seen in the server logs, which were provided to the client.
3. The company throughout the dispute provided the Client and the forum community with the comprehensive information presented in a proper manner.
4. The company asserts that the results achieved in this account were obtained only because of technological glitches. We have a right to say it because we can see Trading History on Mr. Kovacs account. It doesnt contain similar success periods when during a couple of hours was achieved result with several hundred % of profit.
5. We believe, that if Mr. Kovacs' main complaint’s target is to "return voided profit", then he has all the power and chance to contact our regulator (if he believes that FXOpen did an illegal action).From our side, we have faced a loss which we compensated (1800 USD) on a good will. We would like to post once again that we are absolutely right from the legal, business, professional and ethical sides of this dispute, we are unhappy that this situation happened, but this is a common situation in OTC FOREX business (rarely happening with FXOpen), which is solved according to the Agreement signed between the Company and the Client in a respectable manner with the losses taken from our side.
6. We and myself personally never threatened FPA, this case is between Mr. Kovacs and FXOpen only and FPA is just a public board for it. More to say, I was one of the few persons who was defending FPA in numerous Russian forums (sometimes even warned by Admins) against other companies threats.
Actually this is Mr Kovacs who is trying to threaten us with his latest email using FPA name for this. All we try to say is that Mr Kovacs' activity is illegal and indicated as blackmailing, instead of legal actions against FXOpen he decided to threaten us with FPA name in his e-mails. Do you think it's logical for the person 100% sure that he is right? Would you support such threats?
7. FXOpen has obtained a license from ASIC and 2 more respectable regulations on the way, isn't this trustable enough? Do you really think we would be able to pass audit or gain a license with any "black" or illegal activity?

Dear Mr. Paharaoh, FXOpen has grew from a small offshore company to a multinational Forex Broker, we have done many changes and upgrades. FXOpen's technical solutions are one of the most innovative and fair for the traders in this market, that’s why so many professional and profitable traders joined us in the past 2 years. The last thing we want to do is to damage our business, and of course we would not do this for 40K.
Any decision should be based on the facts and ALL facts show that FXOpen didn't do anything illegal in this situation, any decision based on the emotions or blackmailing is illegal and unprofessional.

 

[RahmanSL]

"Any decision should be based on the facts and ALL facts show that FXOpen didn't do anything illegal in this situation,..."


But, also from the facts of this case, I did not read anywhere that Kovacs carried out any illegal trading activities or used any illegal EAs on any of his trades.
He simply traded what he believed & trusted, at that time, that the price feeds on FxOpen MT4 platform were honest and real.

From my perspective, supposing all facts are as reported and posted here, it's FxOpen LP provider who should be held responsible for the price feed glitch and, as such, FxOpen will have to or at the very least show that they are doing something in ensuring that there will not be another repetition of such false price feed.
And the interesting part would be, if this incident is repeated in the future, what will FxOpen do then? Tell/inform the affected client(s) the same thing and follow the same course of action? However, if FxOpen decides to compensate the affected client(s), then wouldn't Kovacs have the right to claim the same?

Prior to this incident, I would willingly defend FxOpen but, with this incident, I simply do not agree with the explanation given and action taken to resolve the case since Kovacs is made/forced to accept the consequences which are not of his doing.
In fact, he is given no choice at all in the matter as this seems to have been foreseen, and indeed expected, by FxOpen to include that in their TOS.
As the case now stands, it's very apparent that the innocence (Kovacs) is being punished while the guilty party (FxOpen's LP) gets off scotch free.
So, nope, I do not and cannot support FxOpen at all in this case as it's being handled very sloppily and even unethical.

If this incident is allowed to be simply passed off and swept under the carpet, there will forever be a lingering doubt on the authenticity and reliability of all FxOpen's price feed.

 

[FXOpen NZ]

"Any decision should be based on the facts and ALL facts show that FXOpen didn't do anything illegal in this situation,..."


But, also from the facts of this case, I did not read anywhere that Kovacs carried out any illegal trading activities or used any illegal EAs on any of his trades.
He simply traded what he believed & trusted, at that time, that the price feeds on FxOpen MT4 platform were honest and real.

From my perspective, supposing all facts are as reported and posted here, it's FxOpen LP provider who should be held responsible for the price feed glitch and, as such, FxOpen will have to or at the very least show that they are doing something in ensuring that there will not be another repetition of such false price feed.
And the interesting part would be, if this incident is repeated in the future, what will FxOpen do then? Tell/inform the affected client(s) the same thing and follow the same course of action? However, if FxOpen decides to compensate the affected client(s), then wouldn't Kovacs have the right to claim the same?

Prior to this incident, I would willingly defend FxOpen but, with this incident, I simply do not agree with the explanation given and action taken to resolve the case since Kovacs is made/forced to accept the consequences which are not of his doing.
In fact, he is given no choice at all in the matter as this seems to have been foreseen, and indeed expected, by FxOpen to include that in their TOS.
As the case now stands, it's very apparent that the innocence (Kovacs) is being punished while the guilty party (FxOpen's LP) gets off scotch free.
So, nope, I do not and cannot support FxOpen at all in this case as it's being handled very sloppily and even unethical.

If this incident is allowed to be simply passed off and swept under the carpet, there will forever be a lingering doubt on the authenticity and reliability of all FxOpen's price feed.

Dear Sergeant, please be a little more attentive! We told several times already that Kovacs saw the real market prices on his trading terminal. He made trades with a very small volume. He just noted that due to technical problems his orders were executed with better prices than he observed in the Depth of Market. After that he immediately raised trade volume hundreds times. It is a red flag that he realised that trading terminal got the problem and he used it in his trading. The Company has the right to delete such trades according to trading agreement signed by any trader opening account with the Company. We believe that forum participants clearly understand all the detailes in this case. We are sure that we totally observed our rules and ethical norms.

 

[Hanif Akbar]

Dear Sergeant, please be a little more attentive! We told several times already that Kovacs saw the real market prices on his trading terminal. He made trades with a very small volume. He just noted that due to technical problems his orders were executed with better prices than he observed in the Depth of Market. After that he immediately raised trade volume hundreds times. It is a red flag that he realised that trading terminal got the problem and he used it in his trading. The Company has the right to delete such trades according to trading agreement signed by any trader opening account with the Company. We believe that forum participants clearly understand all the detailes in this case. We are sure that we totally observed our rules and ethical norms.

Your's trading terminal is your responsibility its not the responsibility of innocent clients. If the problem occurred with your trading terminal its your problem not clients problem. Do whatever you want to do with your LPs or whatever it is but give right away what client had gained. The clients are not technical experts what ever is shown on your trading terminals it is and it should be always considered from your side.

Kindly pay the client whatever he has gained and do not become SCAMS. Do not loose your business because of your mistakes. Pay the client and try to secure your systems, when your trading terminal shall be exact and error free you shall not face any damages.

 

[ForexVerified]

Dear Sergeant, please be a little more attentive! We told several times already that Kovacs saw the real market prices on his trading terminal. He made trades with a very small volume. He just noted that due to technical problems his orders were executed with better prices than he observed in the Depth of Market. After that he immediately raised trade volume hundreds times. It is a red flag that he realised that trading terminal got the problem and he used it in his trading. The Company has the right to delete such trades according to trading agreement signed by any trader opening account with the Company. We believe that forum participants clearly understand all the detailes in this case. We are sure that we totally observed our rules and ethical norms.

Now that I look at the trades a little closer, I can see this. I think the screenshots support FX Open's statement above. At first I thought the trades happened throughout 1 day (and I assumed a possible arbitrage EA), but now I looked at the times and most of the trades (53 of them) happened in a single 22-minute window. And Kovacs did start with a small lot size at 12:30 and then increased it by 30x and 200x immediately afterward. I apologize for jumping to the conclusion that he was likely using an arb EA.

I've seen this same glitch happen at HotForex too. After one weekend a few months ago, when the market opened, I was trading a gap and noticed that my orders were being executed at prices that the chart was not showing. The bid price was actually above the ask price (despite what the chart showed), turning every trade into an instant profit.

While it was tempting, I didn't abuse it. If I had taken advantage of that glitch and turned $1,000 into $44,000 in nearly 22 minutes, I would not have expected HotForex to let me keep it. There's no way any broker would have allowed it.

Brokers have a responsibility to be ethical, but so do traders. If we expect brokers to be truthful and treat us fairly, then we need to act like customers worthy of it.

Scott Wang
Forex Verified

 

[man123]

I am not an active live trader - but I do have a demo trade account daily - still learning from FPA 40 chapter manual - thank you for the info - IMHO it appears that this is a pattern of behavior by Fxopen, it has happened to more than one of the above responders, some one is ending up with the profits (if they exist) and you get offered only your money back - if they truly lose money each time this happens they could not remain in business - or perhaps they actually trade your money on a different account and send you false made-up statements regarding your supposed account - definitely sounds scammish to me

 

[RahmanSL]

Yes, granted that Kovacs did raised and made large trade volumes in a short period of time to realized those huge profits.
And from this fact, it is immediately assumed by FxOpen & some others that "he realised that trading terminal got the problem and he used it in his trading".
However, that is only a supposition and is based on nothing more than Kovacs increasing his trade sizes to capitalized on what he could have thought, at that material time, were market trend.
I too have raised my normal trade sizes when I see market trending in a particular direction, but I have never ever been accused of knowingly abusing the terminal abnormality (if any existed), and my profits have never been deleted either, because I simply did not know and was trading what the prices are shown on the MT4 platform.

Ok, you at FxOpen & ForexVerified have presented some pretty convincing facts which do put some doubts into Kovacs' case, but you at FxOpen just require to have more tact and a little less arrogance in handling client's case as that's exactly how you at FxOpen appears to me in presenting your case here at the FPA.
In fact, you (in particular) at FxOpen reminded me very much of how Javier from FigFX used to reply to their clients here at the FPA.....abrasive and arrogant.

 

[Pharaoh]

I already conceded that FxOpen didn't technically violate its TOS.

I'm still surprised that FxOpen's representative fails to see that allowing a rogue LP to offer FAKE PRICES to FxOpen's clients could make clients angry enough to complain. I'm shocked that FxOpen could even contemplate SUING a client who is upset by this. I'm disappointed to see that FxOpen doesn't even acknowledge that their system of hiding LPs behind NDAs could cast considerable doubt on their ECN model.

FxOpen has acknowledged that trades which originally showed in the client platform as profitable were annulled. Since all sides agree on this fact, for Kovacs to say he does not approve of these nullification and feels cheated is a losing argument in a libel case. If that's all FxOpen has to show, EFF.org would have a field day with a case like this.

I will agree that the escalation of trade sizes isn't in Kovacs favor, but that doesn't change the fact that a bad LP did bad things. How about other clients who had profitable trades nullified? This wasn't a technical glitch. This was a deliberate action of a bad LP.

Previously, I've stood up for FxOpen here at the FPA. In this issue, I have to say that it appears that FxOpen has made multiple bad decisions that are making the issue worse and worse.

 

[dbrawner]

Wow... This is a horse of multiple colors!

Was Kovacs deliberately and willfully taking advantage of a technical glitch to increase his gains? Was he the victim of "bait and switch" pricing by the LP? Was FxOpen complicit in allowing false quotes or just incompetent with their technology?

These are all good questions I think and likely never answered definitively by either party. After all, with all the posturing to date, who's ready to admit wrongdoing?

My concern here is the business policy that chooses to hide behind legal clauses to escape responsibility for their own inefficiencies, errors, or omissions. While this may be perfectly LEGAL, it is morally and ethically reprehensible.

So, consider that FxOpen, when you decide your next step. How many professional traders will stay on board when the next target of your nefarious actions might be any one of them.

If FxOpen can prove beyond a doubt that Mr. Kovacs willingly and purposefully exploited a technical glitch to extract unwarranted profits from the firm, then present the evidence here, now. If not, I say you have no ethical basis to uphold your precious TOS clause and should make Mr. Kovacs whole while pursuing recourse through your apparently much valued LP.

Because, on the face of it as presented here, by both sides,... while you may be legally entitled to your actions, your behavior is that of a bucket shop and a scam.

So, sue me too if you think you can...