IronFX Grilled on Chinese TV by Affiliates, Criminal Fraud Investigation Filed on Air - Updated

Thursday, 04/09/2014 | 08:00 GMT by Avi Mizrahi

In a 20 minute report, a journalist went undercover to experience the deposit process and track the money. A Chinese official called for a “severe punishment” in the event that IronFX is found to be operating illegally.

IronFX Grilled on Chinese TV by Affiliates, Criminal Fraud Investigation Filed on Air - Updated

On August 27, a Chinese TV show called Market Wired Shenzhen on the Shenzhen City Finance & Life channel aired a twenty minute investigative report on the operations of the broker, IronFX in China. The journalist said his investigation had found out that IronFX didn't have the permit to execute international securities, foreign currency trading, or equity trading in mainland China.

UPDATE: Forex Magnates spoke with IronFX about the report and it confirmed to us that IronFX as a company is very careful and obtains legal opinions when entering a new region. It was also stated that IronFX has legal opinions that its operations in China are legal and legitimate. "With regard to the funding, IronFX does not do anything different from what the whole industry does. We therefore were very surprised by the false allegations of the TV station and our lawyers are taking the necessary legal steps against the TV station.”

During the twenty minute report, various allegations and accusations of foul play against IronFX were made and it was revealed that a fraud investigation had been opened by the local authorities. From the time the report was uploaded to the internet on September 1st, the video has already been viewed online about 80,000 times, suggesting that IronFX might find itself with a severe public relation disaster beyond the legal problems.

On the August 27 show, the host explained that Market Wired previously reported that IronFX's MT4 Trading Platform had suddenly stopped working, causing major losses for investors. Following that, people who claimed to be IronFX affiliate approached the TV show and reported on the behind-the-scenes situation of IronFX in China and said they were also victims of IronFX.

In China, the currency market is highly regulated and all international transactions are reported to the government. The yuan (or RMB) exchange rate is still not allowed to float freely as the People's Bank of China keeps control of the exchange rate to accelerate GDP growth. For this reason, complaints about FX companies might attract much unwanted attention not related to the specific accusations in this or other cases.

The TV show was presented in five segments which have been translated below:

Segment 1: Iron Affiliates Complaints

Mr. Li from Guangxi Province, who had previously been working in the marketing field, received a phone call from Cyprus in May of this year. The man on the phone claimed to be from the IronFX headquarters and invited him to join their team as an affiliate, promising him that once he got a client and after the client carried out four trades, he would get a commission of $500.

In the first two months, IronFX paid the promised amount of commission to the affiliate. But starting from the third month, IronFX claimed that the commission policy had changed and according to the new policy, they were not qualified for commissions. Among the excuses not to pay the commission included, “the client has the same IP as the affiliate, which renders the client’s trading invalid,” or “the operation is against the rules," or “you don't have our own website," or “you didn't generate clicks."

Three other affiliates from China experienced a similar experience. On average, IronFX owed each of them $1,000 to $2,000 commission. When they called the IronFX for the due commission, IronFX simply deleted all their affiliate records and told them that IronFX would not pay them anything.

These affiliates had watched the previous episode of the show investigating IronFX, so they came from all over China to the TV channel to talk about their experiences. One trader/affiliate, Mr. Wu, said he always had problems closing the position when he made money. Only when he lost money, could he close the position. He also used other trading platforms but only had this problem with IronFX.

Segment 2: Where Did all the Money Go?

Affiliates and clients of IronFX strongly suspect that IronFX has some backstage control of the trading software and in most cases won’t let the clients make money. Furthermore, clients also discovered that the funds they had deposited into their accounts were not transferred abroad to the big banks in Europe, as IronFX claimed.

A journalist performed a series of deposit experiments and found out that the money he had deposited with different major commercial banks in China went to third party payment channels, later ending up in unknown companies in Shenzhen, Zhuhai, and even at virtual currency companies. From the minute the money was deposited, till the time the amount of money appeared in the client’s account, it sometimes took less than one minute.

The journalist later contacted Zhuhai Zhisheng Digital Technology Ltd., one of the unknown companies which had received the client’s deposit, and the staff member who answered the phone said, “I don't know about the relationship with IronFX. But if the clients who paid IronFX and the money ended up at our account, maybe we will pay IronFX later or maybe IronFX doesn't have the permit to receive this money directly from the clients.”

The journalist asked: “So does your company have the authority to pay money to overseas clients?” The staff member said: “I don't know. Don't ask me.” Later, the journalist investigated the other unknown companies which had received the money but he could not find any information on these companies.

Are they registered abroad then? The journalist contacted the third party payment companies which had transferred the money to them, and the third party payment companies said all their clients are based in China. So the reporter concluded that the money never travelled abroad.

Segment 3: Converting RMB to USD/Euro Accounts

In the IronFX payment options, Chinese clients can only pay in dollars or in euros, but they can pay from almost all of the major Chinese bank accounts. The journalist called IronFX and asked about the speed of international transactions, and IronFX told the journalist that they had good cooperation with third party payment companies in China.

Additionally, they have reserved foreign currency with the Foreign Currency Regulation Bureau. So when a Chinese client pays the third party payment company, the Foreign Currency Regulation Bureau (also known as State Administration of Foreign Exchange or SAFE) will pay the same amount of money to the foreign banks that IronFX mentioned.

The journalist therefore called the Foreign Currency Regulation Bureau, which responded that they did not have reserved money from IronFX and strongly suggested that the journalist check if IronFX has the permit to do so, and also suggested that he didn't invest in them blindly.

Segment 4: Confronting IronFX Representatives

The journalist went to the representative's office of IronFX in Shenzhen but received the same “reception” as during the last interview/visit. One staff member said that he could not answer questions and suggested the journalist turn to someone who dealed with legal matters. But, same as the last time, the legal person was sick at home, again.

When the journalist wanted to ask more questions the staff member in the office just blocked the camera and brusquely pushed the journalist out of their office and closed the front door. The journalist waited outside for a few minutes, while at the same time, a few former IronFX affiliates went inside to negotiate with the staff.

Later on, when the former affiliates came out, they decided to go to the Shenzhen Economic Crime Investigation Bureau to file a complaint because they suspected that IronFX had already hurt the interests of many people in China. They told the journalist that they hope the Economic Crime Investigation Bureau will help them and protect their interests and stop the company's illegal operation in China.

After the affiliates came out of the Economic Crime Investigation Bureau, the journalist interviewed them and they told the journalist that the Economic Crime Investigation Bureau staff said they had put it on record and would report this information to their superior officers and wait for plans on the subsequent steps to be taken. About IronFX’s alleged illegal operation, they said it belonged to the fraud category and they would follow up.

Segment 5: Conclusions

Finance market insider/expert commented on this issue: The fast speed of payment transaction is definitely problematic and unusual. It may involve spread betting.

According to the reported situation, municipal committee representative, Yang Jianchang, expressed that the police, the market regulation bureau and foreign currency bureau should all work together to investigate IronFX. If IronFX really operates illegally in China in foreign currency and gold trading, it should receive severe punishment.

The show ended with the host saying they would follow up on the case of IronFX and provide further reports in future episodes.