The Australian Securities and Investments Commission has handed lengthy bans to the director and former employees of an online foreign currency trader, whose culture insiders likened to something out of The Wolf of Wall Street.
- ForexCT director and chief executive Shlomo Yoshai has been banned from offering financial services for 10 years
- Four former employees have been banned for between three and six years
- Forex trading is a highly complex and risky form of investing which experts say is more like gambling
The activities of the foreign exchange broker, Forex Capital Trading (ForexCT), were first revealed by the ABC in 2019.
Former clients said they had been harassed and pressured into losing hundreds of thousands of dollars by employees of the broker.
On Wednesday afternoon, ASIC announced ForexCT director and chief executive Shlomo Yoshai had been banned for 10 years from offering financial services.
"ASIC found Mr Yoshai's lack of understanding or regard for compliance was so serious it justified the making of the banning period for such a significant period, particularly given he was someone who oversaw the operations of ForexCT," the regulator said in a statement.
In its statement, ASIC said Mr Yoshai was "involved" in ForexCT's trading floor culture, which former account managers likened to The Wolf of Wall Street.
"A bell or a gong was rung when clients deposited funds of certain amounts into their trading accounts and account managers could participate in incentive 'games' such as 'wheel of fortune', roulette tables and dice games to win cash if certain client deposit targets were met," ASIC said.
ASIC said Mr Yoshai put pressure on ForexCT account managers to use high-pressure sales tactics on clients, offer incentives to clients to deposit money, recommend trading strategies that would increase clients' exposure and pressure clients to delay or cancel withdrawal of funds.
The ABC's attempts to contact Mr Yoshai and his lawyer were unsuccessful.
Five former employees of the broker were banned for between three and six years.
Among the allegations, ASIC alleged employees told clients that they did not benefit from the client depositing money, when, in fact, they were paid a commission based on client deposits.
In May last year, ASIC cancelled ForexCT's financial services licence after finding it had engaged in "unconscionable conduct, misleading and deceptive conduct and a failure to manage conflicts of interest".
"ASIC's investigation also found that ForexCT lacked sound ethical values and judgement in dealing with clients, failed to ensure its representatives were adequately trained and complied with financial services laws and failed to ensure that financial services covered by its licence were provided efficiently, honestly and fairly," ASIC said.
ASIC has also commenced civil litigation against the company and Mr Yoshai.
A series of ABC stories revealed significant concerns about the lack of regulation and oversight of the massive foreign exchange brokerage industry.
Forex trading is a highly complex and risky form of investment, which experts say is actually more akin to gambling.
It involves pitting one currency against the other in a series of micro-trades.
If the exchange rate goes up in favour of the currency you have backed, you make a profit.
The constantly fluctuating nature of foreign exchange rates makes it a highly volatile form of trading.
Many companies hold licences granted by ASIC but are headquartered in offshore jurisdictions.
Forex's booming popularity has led to governments around the world cracking down and, in some cases, banning forex trading altogether.
While allowed in Australia, ASIC warns forex trading "requires a huge amount of knowledge, research and monitoring", because currency markets are highly unpredictable and can be affected by so many factors.