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Screenshot of a breaking news alert e-mail from Q2 2017
The National Futures Association (NFA) has issued a ban on introducing broker IFG Markets (also referred to as IFGTrade) and its principle director Wilson Cheng, citing a series of transgressions of NFA rulings which center around deficiencies in upholding recordkeeping standards, as well as adherence to the anti-money laundering procedure, supervision of employees and maintaining responsibilities as an introducing broker.
Perhaps even more grave is the NFA’s assertion that IFG Markets saught to cheat, deceive or defraud FX customers, as alleged by the NFA’s complaint.
The decision to permanently ban both entities from NFA membership, thus rendering it illegal for either to operate in the United States, was taken on October 8, and currently the company’s main website https://www.ifgtrade.com/ appears not to function, but some of the pages within the site are up, including informative sections such as https://www.ifgtrade.com/about-ifg/
One of the most poignant factors in this case is that IFG Markets had been an NFA Member since January 2011, with the company having been guaranteed by Peregrine Financial Group, which
filed for bankruptcy in July 2012 after a high profile demise. After Peregrine filed for bankruptcy, IFG Markets became an independent lB. Mr. Cheng has been a principal and the sole AP of IFG Markets since its inception.
ln March 2014, NFA commenced an exam of IFG. The NFA’s exam was prompted, in part, by questions NFA had concerning the firm’s financial statements. When the NFA arrived at IFG’s offices, NFA found mostly unused office space with no operational phones, vacant desks, and a non-functional website – in other words, a firm that did not appear to be actively soliciting business.
The NFA’s exam found that IFG Markets failed to comply with a wide array of requirements as noted previously. Deficiencies in capital adequacy is a matter toward which the NFA takes a very dim view, and in this particular case, IFG Markets has filed four financial statements with the NFA since becoming an independent IB: certified financial statements dated July 31 ,2012 and August 31, 2012 and unaudited financial statements dated December 31,2012 and June 30, 2013.
Three of these four statements reflected cash balances far above any cash in any of IFG Markets’ bank accounts As an example, the July 31 ,2012 certified financial statement reported approximately $50,000 in cash or cash equivalents when IFG’s bank statements only reflected approximately $7,000 in cash. Similarly, the December 31 ,2012 unaudited financial statement showed IFG Markets having approximately $52,000 in cash while its bank records showed that it only had about $7,000 in cash. Most egregiously, the June 30, 2013 unaudited financial statement indicated that the firm had approximately $63,000 in cash, while its bank statements showed a mere $10 in cash as of June 30, 2013.
In an apparent attempt to inflate IFG’s June 30, 2013 meager cash balance of $10, a deposit of $45,000 was made to IFG’s bank account on July 1,2013. However, over the following two days, IFG Markets withdrew nearly all of the $45,000 deposit – leaving only about $1,000 in its bank account.
Mr. Cheng admitted that, after September 2012,IFG had not maintained adequate books and records to support the capital amounts reported in its financial statements or demonstrate that IFG was in compliance with its minimum net capital requirement of $45,000.
NFA independently determined that IFG was below it minimum net capital requirement in July 2012 and from November 2012 through May 2014. During these months, IFG’s cash balance at the bank was always under $10,000, except for November 2012 when it was $19,000.
Also, during these months, IFG’s proprietary trading account never had a balance of more than $10,000. Therefore, IFG was below its minimum net capital requirement in July 2012 and from November 2012 to May 2014. During these months, IFG’s ANC was also below the equity withdrawal restriction level of $54,000 and yet the firm allowed capital withdrawals to be made during this time.
On March 26,2014, IFG filed telegraphic notice that the firm was insolvent and had not maintained any records to demonstrate that it was in compliance with its minimum net capital requirement, and faced additional censure from the NFA for anti-money laundering procedure irregularities and for exposing his clients to risk by not supervising the commercial operations suitably.
To read the entire case document, click here.