Unlicensed Turkish FX mediation website bankrupt, client cash disappears

Hedefonline’s decline leaves Turkish investors 20 million lira out of pocket after company continued operations whilst insolvent for six months raising alarm bells over customer protection measures

Retail FX traders have had more than its fair share of exposure to the consequences of unlicensed firms making off with their money, which led to a very strict global regulatory backlash ensuring that only those which operate their business correctly and in the customers’ best interests can survive.

The long and drawn out demise of Turkey’s Hedefonline, however, serves to demonstrate that customers in some regions are still exposed to substantial losses due to corporate failure, with the mediation website having gone bankrupt  after a long period of time stretching into the middle of last year during which the company experienced severe financial difficulties but continued to operate.

In jurisdictions such as North America, Japan or Europe where the financial markets economy is regulated by highly respected governing bodies and companies are subject to strict governance procedures with regard to how products are sold to clients, there is often little to be concerned about, however in this circumstance, Hedefonline was not licensed by any regulatory body, and had continued to serve Turkish clients for three years since Turkey’s Capital Markets Board (SPK) filed a criminal complaint against it in 2011.

Subseqent to this complaint, Hedefonline continued to operate from Cyprus as an unlicensed entity.

In essence, Hedefonline was an FX intermediary, which at the time of its demise was responsible for holding 20 million Turkish lira in investors’ monies.

Arif Unver, Head of the Capital Markets Investors Association in Turkey explained to Turkish national news source Hurriyet Daily News that retail FX trading in turkey used to be a very risky business indeed and that some strong measures were required in order to counteract this, and urging all investors to ensure that the firms which they choose to do business with are licensed.

“Forex transactions in Turkey used to be carried out under the counter but lately the Capital Markets Board has introduced a regulation and handed out licenses to companies. Therefore, owners with savings must check the companies with the SPK to see if it has a permit. The license of employees at these kinds of institutions should be questioned as well,” he said.

Unlike in certain other jurisdictions where restitution orders are commonplace when customer funds have been misappropriated, it is uncertain as to whether the investors will be able to retrieve their funds. A website has been set up by those who have lost money due to Hedefonline’s demise, in order to generate unified measures of lobbying in order to attempt to mitigate their losses.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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