MADRID – Prop trading is trading with money that you receive from third parties for which you have to pay a small commission. It has been around for years, but it is now being converted into a concept where young people are being defrauded en masse.
MyForexFunds (MFF) was one of the leading financing platforms but was shut down by US regulators on September 1.
For young people, trading is the latest trend to make money. They receive money from financiers with whom they can trade. They are told that if they are good, they can keep up to 80% of the proceeds themselves. But nothing is less true. They have to pay for expensive exams to reach a high trading level. They are told that with this higher level, they can keep up to 80% of the profits. But it turns out, the exams are so difficult that almost no one passes them.
The role of influencers
Influencers also play a role in these scams, they are used to promote prop trading on social media. They get money for every new platform user who signs up. The scammers are not concerned with trading, but with selling a pseudo-product, in this case, the expensive exams.
My ForexFunds is accused of fraudulently extorting more than $300 million from its customers in this way. The company told customers that after passing the exam they would become professional traders and could use third-party assets. But even though they passed the exam, they never got to work in the real world.
In most cases, Traders Global was the counterparty to the transactions and was also the owner of the platform. Commissions were charged far too high or the orders had unfavourable prices.
The platforms also reach Spain
The platforms are the only ones who benefit from it. Only 0.5% of customers pass the exam and less than 0.1% continue to earn money for several months afterwards. In the meantime, the platform is continuously making money. The customer pays between €100 and €1000 per month to take the exam. The exams are subject to strict requirements and risky investing is rewarded. This model is being copied by hundreds of companies, including Uprofit, The Trading Pit, and TopStep, according to the newspaper El Confidencial. These companies use famous people to promote their business. FundedNext, for example, has the goalkeeper of the Argentina football team, Emiliano Dibu Martínez, as the face of the platform.
The power of influencers
In Spain, influencer Alex Bournay from the Canary Islands announced on his YouTube channel that he is one of the biggest victims of the closure of MFF and that he has lost more than a million dollars. Moreover, he now apologises for recommending this platform.
It seems to be a common thread across all platforms. They use influencers like Bournay to recommend their companies in exchange for a fee per every new customer they refer. Gero N. is one of the 147 young people in Spain who were duped by MFF and who were tempted by influencers to sign up. He says that he would never have started it without these influencers. The business model is to make you believe that you will achieve a monthly return of 2% or more with an account of €100,000. This is enough to live on. But the platforms do everything they can to prevent you from passing the exams. So you are permanently stuck paying for the exams with the illusion that you will earn money from it. Eventually, you find out that only the people promoting the platform have made money.
Legislation in Spain
Spain currently does not have specific legislation for these types of companies. Providing courses or opening accounts are not covered by the Spanish Competition and Market Regulator (CNMV). Consequently, the platforms have therefore found a loophole in the law.