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Trader gets initial deposit back, but loses profits

Discussion in 'Scam Alerts' started by Scam Investigations Committee, Nov 12, 2008.

  1. Scam Investigations Committee

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    The most recent scam case that has been resolved by one of the FPA’s Scam Investigators was only a partial victory.

    FPA member Hossam Park had an account with Sigma Forex. He attempted to withdraw some profits. After several delays and no money arriving, he got a little aggressive with the live chat representatives for Sigma. Sigma forex then suspended his account and ceased communicating with him.

    After the FPA got actively involved, Sigma’s representatives began talking again, but there was some discrepancy in the amount of money in the account. With Hossam’s permission, Sigma forwarded a copy of his account statements to one of our investigators. She noticed that most of his positions were held for shorter periods of time, but that after a very long gap, 2 trades closed a few days apart, each at a considerable loss.

    Evidently, Hossam had hedged a losing trade where he bought 1 full lot of GBP/USD by selling 1 full lot of GBP/USD. This locked in a loss of $7170, plus spread. Some traders might do a thing like this to avoid being forced to close a trade at a considerable loss while waiting for the market to take a more certain direction. [The FPA does not recommend this as a strategy for risk management.] In order to prevent losing one-half of the hedge, both trades did not have a stop loss. His account with Sigma was a swap-free account, so this should have been a safe way to leave the position locked in place while his account was suspended.

    On September 25th, Sigma closed the short position on the pound near a swing high for a loss of $6640 and left the long position open with no stoploss in place for about 3 and a half days as the price fell 290 pips, finally closing it for a loss of $3430. This made the total loss from these trades $2900 higher than it should have been.

    When questioned about this, Sigma’s representative said they changed their margin requirements on September 19th and that the trades were closed due to these new requirements. They said “our aim was to protect our account holders from any danger that may affect their investments.”

    This leaves questions that Sigma never did provide a satisfactory answer to.

    Why weren’t both trades closed at the same time on the 25th?

    What wasn’t 1/2 of each trade closed on the 25th, reducing the used margin while leaving the account protected against price changes?

    Does Sigma Forex really think that leaving one half of a hedge trade running with no stop loss to be compatible with their stated aim of protecting the account holders from dangers that affect their investments?

    Either completely closing the positions or closing 1/2 of each would have saved about $2900 in account equity. This amount was almost exactly equal to the profits earned by Hossam at the time his account was suspended.

    Under the circumstances, Hossam decided that getting the remaining balance back was better than nothing. This amount was about equal to his initial deposit. He agreed to accept it and to make no further claim against Sigma Forex. He chose to end his pursuit of the remaining funds. The FPA Scam Investigations Team was left with no choice but to declare the case resolved, even though we feel that letting Sigma off the hook for $2900 is not a fair result.


    We were pleased that Sigma Forex’s representatives were willing to talk with the FPA about this issue. We were impressed that they offered swap free accounts without any sort of special fees that some brokers use to make up for possible losses on swap negative trades held for long periods of time.

    This issue is resolved, but we are not fully satisfied with the outcome. We do feel the need to warn traders that they should demand a written agreement with Sigma regarding the disposition of open trades in the event that they find themselves unable to access the account for any reason. This agreement should clearly state that any trades closed by Sigma must be done in a way that does not increase the risk of losing account equity and the risk of a margin call. If Sigma Forex is willing to commit themselves to such agreements in the future, people who are thinking of opening account with them will have one less thing to worry about.


    Click here for Hossam’s Initial Complaint

    Click here for the Official Case Resolution Statement
     
    FxMaster likes this.
  2. Just1ForexMan

    Just1ForexMan Recruit

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    This type of reporting of FPA Investigating gave me new confidence in this forums objectives. Glad to be a member.
     
  3. stuuu

    stuuu Recruit

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    Well done FPA! Glad someone is looking out for us.
    -Stu
     
  4. Pip MY Ride

    Pip MY Ride Recruit

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    i agree. its good to know someone has our backs!
     
  5. Pharaoh

    Pharaoh Colonel

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    So while he was locked out of the account, they closed 2 trades at a loss almost exactly the same as the amount of profit he made.

    I would hope that this is just a terribly unfortunate coincidence and that the broker would not do something like altering trades retroactively in order to disguise a flagrant confiscation of profits from a customer.
     
  6. PistolDave

    PistolDave Corporal

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    Do forex brokers have any conscience?

    A definition of conscience:

    "A feeling of shame when you do something immoral."

    Obviously, the "wild west" that is the unregulated retail forex world is filled with brokers that have absolutely none. Conscience, or shame, that is.

    They have no fear of retaliation from the authorities or from individual traders. No rules, no laws, no sense of right or wrong -- no problem.

    The best way to get rich? Start your own religion -- or become a forex broker. Either way you can deceive the people and profit handsomely.

    This forex trading world is the sleaziest, scummiest "business" I have ever seen. Only one small step away from a true and bona fide system for scamming the people out of their money.:unhappy:

    Thank you FPA for doing what you can to help out the people that are struggling to win in this rigged game.

    Regards,
    Pistol Dave
     

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