ASIC and the Australian Federal Police have raided the Melbourne office of an online foreign currency broker accused by clients of harassing and pressuring them into losing hundreds of thousands of dollars.
The raid is a further indication of concerns over practices within the massive online foreign exchange — or forex — brokerage industry.
Officers from the AFP alongside officials from ASIC executed a search warrant last week on the Melbourne office of ForexCT, one of 70 forex brokers licensed in Australia by ASIC.
ASIC also obtained orders in the Federal Court freezing the bank accounts of ForexCT and stopping its director Shlomi Yoshai from leaving the country.
ASIC would not comment on the raid, but the ABC has been told the warrant referred to a number of ForexCT employees.
Although it holds an Australian Financial Services license, ForexCT is wholly owned by a Vanuatu company.
The ABC spoke to two ForexCT clients who claimed employees of the company pressured them into investing hundreds of thousands of dollars with the company — money which was subsequently lost.
It is legal in Australia, but ASIC warned forex trading "requires a huge amount of knowledge, research and monitoring" because currency markets were highly unpredictable and could be affected by so many factors.
Investors essentially speculate on whether a currency is going to rise or fall in comparison to another currency — this is called a "pair".
Brokers such as ForexCT link the investor with another party who takes the opposite side of the contract.
The ABC reported yesterday that another broker, Berndale Capital Securities, had been stripped by ASIC of its Australian Financial Services license and its colourful former director Stavro D'Amore banned for six years from offering financial advice. Mr D'Amore is appealing against ASIC's decision.
Fransisco Marques said he was cold-called by a ForexCT representative in April last year. Although he has no experience in forex trading, he was convinced to invest $500 with the offer that ForexCT would match it.
Within weeks, the 73-year-old former rigger, who lives in Melbourne's northern suburbs, was locked in a spiral that ultimately led to him investing $270,000 of his superannuation with the broker.
Mr Marques said he was bombarded with phone calls by ForexCT representatives, urging him to deposit more money. With the exception of a few small withdrawals, he lost everything.
Mr Marques' daughter, Diana Marques, told the ABC her father didn't tell anybody else what was happening to him until he lost $120,000 in a single night.
"My dad is so risk averse. This is a man who has worked his whole life seven days a week, 12, 15 hours a day, saved all his money, saved his superannuation, all of this and just being been really tight with money," Ms Marques said.
"They would have pushed him to just keep going and going and going, and invest more and more and more. I can see how my dad would have not known what he was doing and trusted what they were saying."
According to Mr Marques, when his trading account showed losses, it was impossible to get his ForexCT client manager on the phone, but as soon as he tried to withdraw money, the representative would call him and convince him he was doing well and that he should invest more.
Mr Marques lodged a complaint with the Australian Financial Complaints Authority (AFCA), which is now considering the case.
Another ForexCT client, Port Macquarie resident Darrin Todd, also made a complaint to AFCA. His case has dragged on for more than seven months, leaving him angry and frustrated.
Mr Todd alleged that last year he lost $450,000 through a series of trades he was encouraged to execute by a ForexCT staff member.
In an initial finding, AFCA determined that ForexCT had offered personal financial advice to Mr Todd — breaching its license conditions — but it said that on the evidence of a handful of phone calls recorded by ForexCT and given to AFCA, Mr Todd had not followed the advice, and therefore did not need to be compensated.
"My dispute is, it wasn't around an individual trade, it was around a strategy and what I was told to do continuously to trade," Mr Todd said.
Mr Todd said a ForexCT employee told him to pursue a strategy called 'martingaling,' which is essentially doubling-down on every loss until your luck turns around.
"I was advised to martingale, to close or hold my positions until they were in a winning status, and then I was enticed and asked to put more money in," Mr Todd said.
"At one stage I couldn't get my money from overseas into Australia quickly, and they actually told me they would credit the money into the bank account until I got to the account on a Monday."
In a statement regarding both Mr Todd and Mr Marque's claims, ForexCT said it was "reviewing the allegations raised while working closely with ASIC".
"Our clients are always a key priority and we do our best to observe a strong duty of care. We are unable to comment on any individual matter," the statement said.
"However, we have a disputes resolution procedure in place and should anomalies arise we ensure our customers are compensated. We welcome any customers who are dissatisfied with our service to contact us."
In a second separate blow, Mr Todd claimed he lost $500,000 he had invested through another broker, Eightcap, after a pricing feed supplied by the broker showed a sudden and massive drop in the price of the New Zealand dollar over the course of a few minutes one day last October.
Mr Todd and some other clients of Eightcap — who also lost hundreds of thousands of dollars — claimed the drop was simply an error in the broker's price feed, and that it was not reflected in the official exchange rate or prices supplied by other brokers. They also asked for their losses to be reimbursed.
Eightcap strongly disputed that claim with the Australian Financial Complaints Authority.
Eightcap initially told clients that the downwards spike was an error, but has now said the price was "true and accurate" and that it derived from a price provided by its "liquidity provider".
In forex trading, the liquidity provider is an entity that takes the opposite side to the investor in any trade, with the broker forming a "bridge" between the two parties.
Eightcap's liquidity provider is a company called GO Markets. However, the ABC has discovered that GO Markets and Eightcap are both part of the same corporate structure, which is headquartered in Singapore.
Mr Todd and other investors are now pursuing a case against Eightcap through AFCA.
Eightcap declined to comment for this story.
See more on this story on 7.30 tonight.