Xforex, the foreign exchange cowboys

By Lewis G. Parker

XForex is a company based in Cyprus that gives novices the chance to gamble their savings on a foreign exchange trading platform. Although registered as XFR Financial Ltd by the relevant financial authorities, XForex advertises on Facebook with photos of drug money seized on the US-Mexico border, fake £50 notes and humongous slabs of gold bullion.

Forex drug money

Their ads claim that people with no financial qualifications can start trading with a $100 deposit. But some of the online reviews of XForex claim that once customers have been lured in by the pushy sales call, the financial firm does everything in its power to prevent them from withdrawing their profits, and in some cases tries to swindle punters out of the hundreds or even thousands they have deposited.

Scores of unsatisfied XForex customers have posted on the Forex Peace Army (FPA) website. They note how the company allegedly sometimes flags up profitable trades as potentially fraudulent and suspends user accounts which make a profit. Other customers say the trading platform often crashes, which has resulted in their investments tanking as the market moves and they’re unable to access their accounts.

When users threaten to report XForex or post negative reviews, the company offers to settle for just a percentage of the profits. In desperation, many people take the bait and post statements on FPA, claiming an “amicable” settlement has been reached and there really is nothing to report here, guv’nor. Of the few positive reviews XForex has received on the FPA website, many have been flagged up by the moderators as bogus, originating from what they assume is the Israel office of XForex.

The Kernel gave XForex ample chance to respond to these allegations but the company has ignored our requests.

Government plot?

But this is only where the fun begins. When I redialled the number that called us from the company’s Cyprus office, I was connected to a special investigations unit at HM Revenue and Customs in London.

I nearly cacked my pants. Imagine it. After calling the number XForex phoned me on several times, each time I was connected to the same HM Revenue and Customs office, which isn’t a pleasant surprise for anyone who’ has ever filed a tax return.

Initially I was seduced by a theory that the whole XForex business was being run from with Her Majesty’s government, because I couldn’t imagine how an HMRC number could call me if they weren’t behind it all.

But I met one of the tax inspectors whose office phone I kept being connected to and he seemed as baffled by the whole ordeal as I was. So I arranged XForex to call me back from another phone, and when I redialled that London number, I was put through to a packaging company in India.

After speaking to communications expert Jason Coyne, a partner at IT Group UK, it seems like XForex are able to bluff it with a ‘dark arts’ technique known as “caller ID spoofing” or a variant thereof, which is often employed by foreign con artists to make it seem like they’re calling from a local number when in fact they’re in some tax haven hundreds of miles away.

When I spoke to XForex’s English desk manager “Lilian Harris” (we have reason to believe they use phony names) about this, she said, “We have of course an operator that we work through,” before noting that all of the company’s numbers could be found on its website. The number that called me does not appear anywhere on the company’s website, as it belongs to a member of HM Revenue and Customs in London. XForex’s legal department has so far not got back to us.

Cue Banjo Music

According to the UK telecoms regulator Ofcom, this could be illegal. “We consider that persistently spoofing a number would constitute ‘persistent misuse’ and would therefore be unlawful under the Communications Act,” said an Ofcom spokesperson.

An HMRC spokesman said: “We are looking in to this potential issue. There is no risk to data security.”

As if photos of drug money being used as bait and the online reviews weren’t enough, in 2010 Quebecois regulators in Canada urged investors “to be cautious about solicitations from Xforex through ads posted on websites.” It also warned that the company was not registered with the Quebecois authorities and may have been in violation of the law.

A year later XForex appeared in a US federal court in Illinois in 2011 under its previous registered name, OCM Online Capital Markets, charged with trading without a license. Empowered with new powers granted to them under the Dodd-Frank financial reform act, US regulators chased the cowboys out of town.

It may not be long before other regulators follow suit.