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Anyone burnt by PFGBEST's closure?

Raiden
Jul 14 2012 at 07:35
244 posts
Would be interesting to hear about your recovery process from the trustee.

I note amusingly that you can still download their MT4 platform, along with connecting to their trade server.

I wrote a small observation on counterparty risk rising from this incident.
https://raidenworks.com/2012/07/14/your-specific-counterparty-risk-is-pretty-much-a-crapshoot/

Consistency above all.
compuforexpamm (compuforexpamm)
Jul 14 2012 at 08:27
265 posts
I'm not involved in PFG, but I'm going to comment.......based on my experience with JadeFX which is strikingly similar, it took the CFTC over a year to get us our funds back, eventually returning 58.5% to us.

I'm done with the thieving bastards in the USA.

Wealth Creation Through Technology
Raiden
Jul 14 2012 at 18:29
244 posts
That's tragic, sorry to hear that.

I'm reading that Jade FX was domiciled in Belize, and run as a bucket shop. It sounds like it would have folded in time had the CFTC not got involved, in which case, you might have gotten nothing back at all if Jacob Juma Omukwe absconded.
https://forexmagnates.com/cftc-shuts-down-jadefx-owned-by-jacob-juma-omukwe/

Consistency above all.
James_Bond
Jul 16 2012 at 08:39
556 posts

Raiden posted:
Would be interesting to hear about your recovery process from the trustee.

I note amusingly that you can still download their MT4 platform, along with connecting to their trade server.

I wrote a small observation on counterparty risk rising from this incident.
https://raidenworks.com/2012/07/14/your-specific-counterparty-risk-is-pretty-much-a-crapshoot/


Haven't been burnt by them, but will be interesting to see how this develops.
I don't understand why they're not taking the website down - it looks to be working normally and still accepting new accounts?

Raiden
Jul 16 2012 at 11:39
244 posts
Unlikely, from the Notice of Member Responsibility Action under NFA Compliance Rule 3-15 issued, they are 'prohibited from soliciting or accepting any additional customer accounts or customer funds, except as margin for existing positions.'

So technically, you could deposit more money to maintain your existing positions, but I'm pretty sure not a single person/entity is doing that.

Consistency above all.
dlathrop
Jul 17 2012 at 00:02
33 posts
The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?

There are risk-lovers and there are risk-haters, but the best traders will take the risk as long as they get paid for it.
James_Bond
Jul 17 2012 at 10:33
556 posts

dlathrop posted:
The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?


Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)

James_Bond
Jul 17 2012 at 10:35
556 posts

Raiden posted:
Unlikely, from the Notice of Member Responsibility Action under NFA Compliance Rule 3-15 issued, they are 'prohibited from soliciting or accepting any additional customer accounts or customer funds, except as margin for existing positions.'

So technically, you could deposit more money to maintain your existing positions, but I'm pretty sure not a single person/entity is doing that.


How can they do that? That is quite misleading for new customers who have no clue of the current situation. Newly deposited funds will be probably only used to reduce losses for existing accounts. It's like they're taking part in the scandal.

Raiden
Jul 17 2012 at 11:59
244 posts

James_Bond posted:
How can they do that? That is quite misleading for new customers who have no clue of the current situation. Newly deposited funds will be probably only used to reduce losses for existing accounts. It's like they're taking part in the scandal.


It would be better for the trustee to place a notice on the site and divert any attention to the necessary links/emails for resolution. But as with any business failing, much less one this sudden, and with fraud involved, things get a little messy. I understand there's a skeleton crew but they would most likely be doing forensic accounting now.

Their accounts have most likely been frozen by court order and any deposits would probably be bounced back by the banks administering to them.


James_Bond posted:
Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)


It's not necessarily a bad business transaction. You never know, the buyers may be privy to how much the company accounts hold. And client funds rank above secured creditors. Of course, in this particular case, if $5mil is what was left of the declared $220mil client funds account, it's not a stretch to say that there isn't much money left in the company accounts either.

Consistency above all.
dlathrop
Jul 17 2012 at 16:41
33 posts

James_Bond posted:

dlathrop posted:
The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?


Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)


Actually, you're wrong. It's a great business model when executed correctly. There are various methods of evaluating distressed debt. Companies that buy distressed debt have access to the distressed company's data (previous financial statements, etc.). There are also various other avenues of collecting information about distressed companies. This enables the (buyer) companies to be able to come up with a somewhat accurate estimate of the distressed debt's value. Let's say they believe the value of the debt is $0.35 on the dollar. There's always a risk that their estimate doesn't fall within an acceptable range, and they don't want to over pay for the debt, so they then mark down their bid. (i.e. to $0.25 on the dollar.) Usually, such a practice is profitable. If it wasn't, these companies wouldn't exist.

There are risk-lovers and there are risk-haters, but the best traders will take the risk as long as they get paid for it.
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