Lid Lifted On OakFX Boiler Room Following FMA Regulatory Warning

Despite the ongoing worldwide purge of the FX industry’s less than savory individuals by government authorities and regulatory organizations, the occasional trickster is still apparent, it seems. Today, the lid was lifted on Phoenix Forex’s somewhat controversial OakFX scheme and its perpetrator, Mark Brewer.

Mr. Brewer, according to a report by New Zealand national news organization, the Sunday Star-Times, had used aggressive techniques and foul language in sales meetings within Phoenix Forex , and pressured sales staff into selling the product under any circumstances. According to a recording of the meeting obtained by the Sunday Star-Times, Mr. Brewer used expletives and told his colleagues: "You can go and give them a f...ing reacharound, mate, I don't care. Be creative. Get the deal done, now. Take the money, now”.

Mr. Brewer went on to say that the OakFX "package" was "special," the product was "good," and included a 30-day money-back guarantee and free iPad. "We're offering something special in order to close them. Not everyone gets an iPad all the f...ing time," he said.

Just last week, Forex Magnates reported that the New Zealand Financial Markets Authority (FMA) had issued a warning to the public that this particular scheme promised unrealistic returns, contained misleading information and potentially could be intending to dupe prospective clients into investing in what is effectively a form of a Ponzi Scheme .

The New Zealand FMA's statement expressed that "In FMA's experience, it is highly unlikely that this kind of investment can deliver such high returns. Phoenix Forex has not been able to provide any evidence to support its claims of having achieved these returns. Further investments of this nature carry a high risk of loss of some or all of an investor's capital, and losses can exceed the amount of the original investment. The warning recommended that investments promising unusually high returns, are often not legitimate offers.

Therefore, the New Zealand FMA urged caution by anyone considering dealing with Phoenix Forex. New Zealand, until recently a jurisdiction with a very light regulatory framework, has made continual efforts to align its laws with those of other nations in the region with developed financial markets economies, and under the leadership of CEO Sean Hughes, the FMA has grown into a fully-fledged regulatory authority with a set of parameters and penalties for those who seek to transgress.

At the time of this meeting, Mr. Brewer was an undischarged bankrupt, which although not illegal unless a director of the company, indicates that he had little to lose and a lot to gain at the expense of unsuspecting investors. The OakFX scheme is aimed at senior citizens and boasts of 50 per cent returns from its trading software packages, costing up to $25,700 in license fees, which according to the New Zealand FMA is unrealistic and not supported by evidence.

Sales Legend Used Unsavory Tactics

Mr. Brewer, whose Linkedin profile describes his profession as “Sales Legend” and that he obtained his education from the University of Hard Knocks from 1974 to 2012, is due to be sentenced next month following a guilty plea to managing the Intervest Global (NZ) business while bankrupt.

The type of tactics used in order to peddle the OakFX scheme are not new to Mr. Brewer. His activities at Intervest Global involved selling expensive software packages purporting to allow investors to reap massive profits. Intervest's Trilogics package which sold for $23,200 promised investors the ability to make a profit from gambling on horse racing.

In 2010, Intervest Global's Australian parent was forced by the Australian Competition and Consumer Commission to sign an undertaking promising to withdraw untrue advertising. Subsequently, it was argued by the company that it was a software distributor, and therefore, not subject to financial services regulations. Intervest Global’s advertisements promised investors guaranteed earnings of more than $50,000 after the purchase of a $23,200 software package allowing large-scale gambling on horse races. During his tenure at Phoenix Forex, Mr. Brewer generated further forceful tactics which were designed to pressure investors into handing over their money.

He explained to sales staff in the recorded meeting that they should “be creative" if the iPad pitch didn't appeal to a potential investor and provided a suggested response: "If you don't want it, we'll give it to Starship [children's hospital] for you. We'll engrave your name on the back, and give it to the cancer kids to play Monopoly on. How does that sound?"

Hiring and Firing

Questions sent to Mr. Brewer and Phoenix Forex executives and shareholders by the New Zealand press were answered in a written statement by Kendall Twigden, the company's sole director and majority-owner. She said questions about Brewer's role amounted to a "witch hunt" and he was employed by the business as a "senior salesman".

Several former Phoenix Forex staff said Mr. Brewer exercised hiring and firing authority, but Ms. Twigden said: "I managed the business and am ultimately responsible for hiring and firing staff." A spokesman for the Official Assignee, who prosecuted Mr. Brewer for his activities with Intervest Global, said the Official Assignee was aware of his involvement in Phoenix Forex. "We are aware that he may have been involved in the management of that company. However, as he was already found guilty of management of a company while bankrupt, he can't be prosecuted again for the same thing."

Subseqently, Ms. Twigden and Mr. Brewer have returned to their rented $4 million beach front property at Milford on Auckland’s North Shore, overlooking the Hauraki Gulf.

Quite clearly, whilst indeed these tactics are not sustainable long term, due to regulators unearthing them and bringing them to light, as well as exercising enforcement proceedings on their perpetrators, there are still such schemes in the midst. For this reason, the regulatory scope is increasing continually, and more firms with unpleasant intentions are likely to feel the long arm of the law.

A special report detailing the regulatory surveillance systems used in the Asia-Pacific regions will be included in the forthcoming Forex Magnates Quarterly Industry Report for Q3 2013.