The enigma of FXUnited, Power United is something that has recently caught my eye, as it provides yet another FX platform based investment scam, albeit a forked version with a ’twist’ that appears to have been quite plausible to the early entrants who helped build sufficient momentum to get it up and on its way.

Ive copied across the post from fxunited.blogspot "Is Fxunited aScam?  No here is why  and have provided a few notes and references to the very obvious shortfalls in their rationale.

Its only an off the top of the head review, its not meant to be a review capable of standing up to a Spanish inquisition. But on first pass its sufficient to anyone that hasn’t already fallen into someone’s downline to realise its all bullshit.

Thursday, 14 May 2015

Is FX United a scam? No here is why


Figure 1: Blind Accusation

1) The minimum returns of 12% is nothing compared to individuals who trade manually and gain up to 500% returns in just 14 days because of their excellent knowledge of the FOREX market. (Refer to figure 2 for more details)

Figure 2: May's return up to 14/05/2015

The FOREX market is an open market and also the world's biggest market with a trading volume of 5 trillion USD a day.


Source:



2)  FX united(United Global Holdings Ltd) is regulated under  FSPR
Here is the company profile
Source:

well no its not. Not only does it not hold a FSL the company no longer exists. 




Source:


3) 3) The domain was registered in 2006, which means it has been up and running for 8 years. Any other scam website would already have numerous reports piled against it and would have been taken down a long time ago.


Source:

Well sort of. The domain has been around longer than that. Check it out;


According to waybackmachine


As you can see there is NO ACTIVITY between the beginning of 2005 and early 2013.



4) FX united is a hybrid of STP broker and Market Maker


Source:

Thats great. But unless they are a regulator its meaningless. 


5)There are two typical Forex Broker models:

Forex broker - Straight Through Processing (STP)

In this model, a Forex Broker is an intermediary between its clients and liquidity providers. Client's orders in the STP model are automatically sent to a liquidity provider, and a Forex Broker gets a commission and a part of the spread. In this model, a Forex Broker Company is interested in increasing the trade volume, as it profits by receiving commission for each deal. There is no conflict of interest between the Forex Broker doing STP and its client.

Forex broker - Market Maker
This model implies that a client buys and sells through a Forex Broker. In fact, the Forex Broker, at the same time, is a counterparty of a deal. If clients get profit, a broker bears a loss, and vice versa. Most of the clients of a Forex Broker have no experience at the Forex exchange market, so 95% of them are likely to lose their money. This model resembles a casino, where most clients are expected to lose their deposits within 1-2 months. In this model, there is a conflict of interest between a broker and its client.

Fxunited acts upon a combined scheme:
FxUnited Hybrid forex broker business model
For all cent accounts, FxUnited serves as a market maker, i.e. the other party of the transaction. This is due to the terms of the liquidity provider, which do not allow transactions fewer than some specific volume. For all standard and ECN accounts, FxUnited applies the STP technology through a bridge connected to a liquidity provider. All transactions that exceed 0.01 lot (1,000 units) are sent to the bridge and then to the liquidity provider. FxUnited receives a part of the spread from each transaction.

Liquidity Providers:
Please provide a monthly report between FXU and their liquidity provider.  a) total transactions b) volume of trades c) profit/loss d) percentage of the liquidity providers business this represents 

this will then allow a comparison against the liquidity providers publicly available reports.

Source:




*Anti-Money Laundering Policy

The objective of Anti-Money laundering procedures that FxUnited implements is to ensure that customers engaging in certain activities are identified to a reasonable standard, while minimizing the compliance burden and impact on legitimate customers.Money laundering is the act of converting money or other monetary instruments gained from illegal activity into money or investments that appear to be legitimate, so that its illegal source cannot be traced. Domestic and international laws that apply to companies, whose customers can deposit and withdraw funds from their accounts, make it illegal for FxUnited company, or its employees or agents, to knowingly engage, or attempt to engage in a monetary transaction of criminally derived property.

FXUnited Company……its not the company name.   This is just boilerplate stripped from other sites.


*Implemented Procedures

The objective of Anti-Money laundering procedures that FxUnited implements is to ensure that customers engaging in certain activities are identified to a reasonable standard, while minimizing the compliance burden and impact on legitimate customers. FxUnited is committed to assisting governments combat the threat of money laundering and financing terrorist activities around the world. For that purpose FxUnited has set up a highly sophisticated electronic system. This system documents and verifies client identification records, and tracks and maintains detailed records of all transactions.
FxUnited carefully tracks suspicious and significant transaction activities, and reports such activities "providing timely and comprehensive information" to law enforcement bodies. To uphold the integrity of reporting systems and to safeguard businesses, the legislative framework provides legal protection to providers of such information.In order to minimize the risk of money laundering and financing terrorist activities, FxUnited neither accepts cash deposits nor disburses cash under any circumstances. FxUnited reserves the right to refuse to process a transfer at any stage, where it believes the transfer to be connected in any way to money laundering or criminal activity. It is forbidden for FxUnited to inform customers that they have been reported for suspicious activity.

That is doubtful. Wouldn’t it be more likely that you would advise the depositor that suspicious activity has occurred within their account (it might not be them it might be a third party).
Assuming this is correct. Which regulator are you reporting to?  Since FXU is not regulated by any body, doesn’t appear to be operating in any domicile (that it admits to), there is a new shiny office allegedly in the Philippines but no sign of being regulated within that jurisdiction. 

Maybe you just tie a note to a pigeon and send it off and let it work out where and who to provide the report to (with strict instructions not to turn up at the depositors house and give them  the inside scoop).

*Additional Disclosures

For the purpose of complying with Anti-Money laundering laws, FxUnited requires two different documents to verify the identity of the customer.

The first document we require is a legal government-issued, identifying document with the picture of the customer on it. It may be a government-issued passport, driver's license (for countries where the driver's license is a primary identification document) or local ID card (no company access cards).

The second document we require is a bill with the customer own name and actual address on it issued 3 months ago at the earliest.

That makes sense. Don’t accept a utility bill 1 week old. Make sure it is at least 3 months old.  10 year old bill would be better. 

It may be a utility bill, a bank statement, an affidavit, or any other document with the customers name and address from an internationally recognized organization.


Yep. perfect.  My name is W.E Coyote and here is my bill for TNT from ACME where i purchased all of these items


FxUnited also requires a completed and physically-signed account application form to be submitted to the company. Customers are required to submit uptodate identification and contact information in a timely manner, as soon as changes occur.

Documents in non-western letters must be translated into English by an official translator; the translation must be stamped and signed by the translator and sent together with the original document with a clear picture of the customer on it.

Please be aware that chargebacks to Perfect Money and Ezybonds payment systems are prohibited.
 

Note; Do a google search on Perfect Money (Financial Magnates have some insightful articles )



To make a withdrawal from a trading account to one of these systems, a correspondent demand must be sent via Client Cabinet. Money will be loaded into the wallet within 3 business days. If money has been lost when trading, it cannot be reimbursed by means of a chargeback.

FxUnited requires all deposits, where the name of the originating customer is present, to come from the name matching the name of the customer in our records. Third party payments are not accepted.


But it is ok to generate an invoice for the depositor to use which instructs the depositor to settle the invoice by wiring their ‘funds’ to the Czech Republic bank account of a Hong Kong Company. 
  • The depositor has no contractual relationship with.
  • The invoice that is being settled by the transfer does not in anyway reflect the contractual arrangement being entered into between the depositor and FXU.
  • Could there ever been any rationale explanation why a Hong Kong company has a Euro denominated bank account in the Czech Republic an an intermediary for UFX who have entered into a US dollar denominated arrangement with someone the HK company hasn’t done KYC on?
  • The rationale that the funds are transferred in Euro’s because it is a European bank is quite amusing. 
    • Czech Republic is part of the "EU" but it does NOT use the Euro as its currency. 
    • A quick google confirms that Czech banks do provide USD, Euro’s and of course Koruna (their local currency).

As for withdrawals, money may be withdrawn from the same account and by the same way it was received.


How is that possible? when the funds are deposited with a third party?



For withdrawals where the name of the recipient is present, the name must exactly match the name of the customer in our records. If the deposit was made by wire transfer, funds may be withdrawn only by wire transfer to the same bank and to the same account from which it originated.


Again. the funds are deposited in Euro’s with a 3rd party who then presumably transfer the funds to FXU in some form. 

Who takes the fx risk from this process?


If the deposit was made by means of electronic currency transfer, funds may be withdrawn only by the means of electronic currency transfer through the same system and to the same account from which it originated.




this is just boiler plate copied from someone else



7) PONZI scheme definition

"A form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors."

So how can this be a PONZI scheme when the EA is trading solely on depositors’ capital and the profit gain is from the brokerage commission from the depositors capital itself? A typical Ponzi scheme demands a locking period, but this is not required for FxUnited accounts or the auto trader.




Not quite true, the ‘scheme’ is structured in such a way that all the participants are ‘dis-incentivised’ to ever remove any of the funds from the e-wallet. 
(1) the significant incentives associated with introducing new participants downline and benefiting on a monthly basis from their ‘deposits’ obviously influences each holders decision to not withdraw.
(2) everyone uplink is motivated to provide whatever encouragement or influence that is required to ensure (a) you keep your funds in play (b) that your confidence is un-waivable so that you continue to recruit new depositors.



8) The product (CGAT)

                                     Source: http://www.fxunited.com/cgat.php


CGAT allows depositors to earn a percentage of the Company’s Profit from the brokerage earning whenever there is any trading position closed by the Expert Adviser (EA) automatically.



Any deposited amount into the CGAT trading account is subject to a 12 month contract. The package offers 1 auto trading account for each deposit. Each individual is entitled to have up to 10 CGAT accounts, the maximum deposit can range up to USD100,000(USD10000x10). There is no LOCKING PERIOD for the depositor's CAPITAL. If a depositor chooses to deposit today, the funds can be withdrawn anytime and on ANY circumstances. A 3% withdrawal fee will be charged if the depositor request for the capital withdrawal before the end of the 12 month contract.




The 12% sounds ridiculously high BUT ONE must first understand how it is obtained.
Let's begin with the Self Affiliate. We shall take an example of a USD10,000 deposit. The company will give the depositor a 30% welcome bonus which is PURELY for trading purposes only. Thus the depositor equity is 130%
Money management is 0.02 %( FIXED) of the equity, the spread is 3.5(FIXED)
The EA will trade 2.60 pips per trade × 3.5 = USD9.10

In other FOREX brokers, traders must bear the brokerage commission. This means whether the trader wins or loses a trade, it is always a WIN situation for the broker because the broker gains from the SPREAD. This USD9.10 is a guaranteed profit for any broker because as long as a trader executes a trade, the broker makes money. For other brokers who do not share their brokerage commission, this USD9.10 =  profit is kept by the broker. However in FX united, the broker chooses to SHARE the brokerage commission regardless the EA wins or loses the trade. For the depositors self-affiliate (Own deposit), they get up to 28% from the USD9.10. So USD9.10x28%= USD2.50

so there can be up to 500 trades a month

USD2.50 × 500 min trading a month = USD1200 (12%)
USD2.50 × 800 tradings a month   = USD2000 (20%)


Probably worthwhile checking your definition of spread


8) Now back to the chart
Earlier we've explained how it shares 28% of trading commission(Self Affiliates), what about the rest of the trading commision?

Its been a long time since some suit wearing nob tried to flog me overpriced supplements, herbs, motivational tapes, cleaning products and the dream of becoming a triple platinum diamond uplink juggernaut at a meeting at a desperado’s house in suburbia but the MLM formula appears live and well.  
I cannot understand why Goldman Sach’s hasn’t taken this space by storm. Clearly they are missing out. What a bunch of dumb dumbs they are over at GS.






There is an OPTIONAL network marketing plan for all CGAT depositors who are interested to make MORE money, however if they are not interested to do so, they will STILL enjoy their own monthly returns.
Now let's clarify why do many other FX United agents are looking for DEPOSITORS?





Notice how simple the winning formula is. Its a pity those reckless fools at Long Term Capital Management didn’t dumb down their formula they might not have almost collapsed the entire financial system. If only they had access to the brainpower behind Power United.



Let's take an example of when an agent recruits a depositor, the agent will get 10% of the recruited DEPOSITOR brokerage commission (How is the USD9.10 obtained? Look at the self-affiliate formula). Well in our own opinion, this is just pure genius -- MONTHLY returns from just 1 depositor. There is no LIMIT for agents to recruit depositors DIRECTLY under them.
Let's take an example of 5 USD10, 000 investors (USD450X5 BASED on MINIMUM RETURNS) = USD2, 250 monthly returns from purely brokerage commissions. The maximum deposit is USD100, 000 so the agent will be enjoying a MINIMUM USD4, 500 per month (Level 1). If the level 1 depositor also recruits another depositor, the agent will get 5% from the (Level 2) depositor which is equivalent to 2% monthly returns. This goes on to LEVEL 4. The agent gets monthly returns from the depositors as long their capital is still intact. Sounds awesome huh? Close a deal with a client and enjoy monthly returns... which other business offers this?


28%+10%+5%+4%+1% = 48%


The broker only shares up to 48% of its brokerage commission, the rest of the 52% goes to the broker. This is how it’s VERY feasible to offer up to 4 levels out of payout. However this is calculation applied on the first year for the depositor's CGAT account.

By the way the total monthly profit sharing is paid at the minimum percentage as stipulated in the table below.

This fact sheet will not go too in depth regarding the networking side -- instead it is aimed at providing a simple explanation so you can understand how the rest of the trading commission is shared. However, if you’re keen on exploring more, please feel free to contact an FX united power agent nearest to you.


how about you just provide a copy of the licenses held, the responsible managers, each individuals license in each of the jurisdictions you have clients.

If you do that I’ll give you some beans that will let you grow your own giant beanstalk. You can also have my pet flying pig.


9)
What happens if the trades done by the EA does not reach 500?
Let's take 400 trades for example,
USD9.10 x 28%= USD2.50 x 400 trades  = USD1000 (10%)
However the company ensures the minimum returns are 12%.

Remember the broker(FX United) still profits up to 52% from every single trade?
9.10 x 52%=USD4.73 x 400 trades = USD1892, so the broker will TOP up an additional USD200 from their own commission to the depositor to even the depositor returns to 12%. USD1892-USD200= USD 1692(FX United commision)
USD200+USD1000= USD1200 (Depositor's returns are assured to a minimum 12%)

Well not really as there are operating and administration costs associated with each trade.  Just maintaining the books and records on a crappy little $1k account would be far from worthwhile. 


On the bright side, the broker (FX United) still make profits up to USD1692. FX United is an international company with many depositors, so let’s take an example of 100,000 depositors.

The broker will profit up to USD 169, 200,000 a month. Win/Win for the BROKER/DEPOSITORS. Let's make this clear, the returns are FROM the spread NOT from trading profits.


The spread being 3.5pips (fixed)   With the spread being defined as the commission. 

How many billions of dollars are being traded to skim US169million a month for brokerage?  No wonder they are changing liquidity providers often.  Its because they must be sending them broke.

THE BROKER PROFIT STILL HAS TO COME FROM SOMEWHERE OR SOMEONE.

who is the counterparts that consistently loses????

In the FOREX world there is NO GUARANTEE from TRADE PROFITS but BROKERAGE commission is always a win- win situation for BROKERS.   This rationale is why isn’t the entire world just brokers. Who needs clients or counter parties. Lets just be brokers. Trade all day and reap the rewards.  This rationale underpins their entire argument.



Amusingly, the EA is executing 100% of the transactions, on behalf of the client. So why the charade and risk taking with taking clients money, cycling it through Czech Republic, managing it in cyberspace and then having all the headaches of managing liquidity providers, interacting with the depositors, sending money back and forth.

Its far simpler than that.  Ever depositor gets their own Meta Trader EA which is connected to the liquidity provider and the depositors bank account with their funds. The EA runs automatically, skimming the brokerage profits from the trade, the trade is settled between the counter parties and 52% of the brokerage is credited to FX united account. 

Isn’t the magic in the EA that makes the bets and auto trades?  Then just provide that and put it in the hands of 1million people and take 52% of the brokerage. Why not? Because it can’t and doesn’t work like that.



There are questions such as why doesn't FX united apply a huge loan from a bank. So why do other banks also offer FIXED deposit returns if they can just take loans from other banks? Does this make any sense? It's because they are in the same business.

Your rationale makes no sense.  You have you own balance sheet.  You can borrow against that balance sheet for almost nothing. You could run the same trades and take 100% of the fixed spread. But that wouldn’t give you the cash to make the 12% payments.




The most obvious flaw is the ‘spread’ for the commission has to come from somewhere, and it can only come from one of the counter parties of the trade itself. 
So is it coming from the depositor or the liquidity provider?

Who is the winner and who is the loser in each transaction?

Why would a liquidity provider be interested in being the counter party in a transaction designed to skim brokerage profits from them? 




10) When a depositor registers for an account in Fx united and decides to deposit in the EA, the user will be given a CGAT ID and password of the user’s choosing. The depositor is then able to log in METATRADER 4 which is the largest FX platform and VIEW all the trades done by the EA LIVE




Why can’t you provide a ‘global dashboard’ of all the EA trading for the month.  It should be possible to show all 100,000 transactions for the month.





The executed transactions are logged comprehensively, which can also be checked in the FOREX MARKET at real time. This is a VERY transparent EA as the depositor is able to track how his/her capital is traded.
There is no possible way these can be FAKE trades and everyone here is welcome to take this screenshot and compare it with the FOREX market.




So you are showing a single trade completed by an EA for a single depositor and expect an outside party to match it up to the live forex market?  Thats pretty pointless.
But in any event, lets just extrapolate this thinking out.  So we have been provided a single trade at a specific time, which ‘skims’ enough profit to cover the cost of the transaction.
(1).  Scale.  Lets assume the provided trade is real.  Thats 1 transaction for 1 account. Each depositor can have up-to 10 accounts with a targeted 500 trades per month. So that is 5,000 trades a month.  








10) Profits/Brokerage commission made from the trades will be stored in the depositor’s E-wallet.  These profits can be WITHDRAWN directly to the depositor’s personal bank account ANYTIME!




"Stored in their e-wallet" they can withdraw to their own personal bank account anytime????? 
So what is their e-wallet?
(a) Is it not a segregated account owned and controlled by the depositor? Or
(b) is it just a ‘representation’ of the depositors cash position with FX United?

Does that mean that the depositor’s funds are ‘pooled’?  If so with who? What Jurisdiction? With what bank? 

          Any variation of the above would require a financial services license within the jurisdiction that the funds are being pooled, held, buried in a backyard, or under someones mattress.






11) Some sources claims that FX United has not released funds for certain individuals. In truth, most cases have been resolved. But why did FX United ban certain countries? FX United does not accept traders/registration from high-risk countries such as Nigeria, Iran, USA, Cuba, Sudan, Syria & North Korea.

This is to comply with the financial license that they have now. Disclose which licenses FX United currently has Funds deposited from these countries are also not accepted. The image below states that CHARGES have been dropped and the above mentioned client have received their funds.


FX United do NOT hold any financial services licenses in any jurisdiction. A financial services license typically would include;

-   A defined scope as to the services that can be provided within a jurisdiction. 
-  Each product that is licensed would have a PDS (Product Disclosure Statement) or equivalent document.  A REAL example can be found here
- Financial Requirements: including providing financial statements, segregation of capital, security bonds 
- Insurance: A required level of insurance coverage.
- Responsible Managers - Regulator approved individuals under the license who have sufficient qualifications and experience.
- Training: Ongoing training to authorised representatives.
- Compliance & Risk Management: Approved internal procedures;
- operations
- client management
- dispute resolution
- technology and HR
- compensation and insurance 
- conflicts of interest
- risk management
 The following link details all the ongoing license responsibilities required by ASIC in Australia, each regulatory will broadly have similar requirements;




There are plenty of other agents out there that might advertise this business as it were a scam, but Power team members have pledged to disseminate information in a professional manner. We provide in depth explanation and support to all our clients. To those who are still skeptical or still insistent that this system is a scam, PLEASE provide proper evidence. 



Apart from FX United and its representatives requiring FSL’s in the various jurisdictions that they operate, so to would Power United, which they clearly do not have.
The CGAT is a financial product that would require a PDS or similar.



Thank you,
We have a dedicated support group to answer any inquiries related to FX United. Our website is



LMAX Liquidity Provider
There is often the representation that LMAX is FX United’s liquidity provider.  Its doubtful there was much in the way of a material relationship, which more likely concluded after the dufus Brian Johnson gets on stage and makes an absolute mashing in his attempt at describing of the unpegging of the Swiss Franc in Jan 2015 and suggests that FX United was able to weather the subsequent chaos relatively unharmed, and in the process points out LMAX as their partner. At that point anyone with a brain would be frozen with fear wondering wtf.

Its worthwhile noting that LMAX are a UK Company, and as such its pretty easy to have a good look at who they are and what makes them tick. Check out the following link to LMAX’s records at Companies House.












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