July 20th, 2021 editor’s note: I don’t know how many of you are going to understand the post below with so many redactions. If you know, you know. I decided to restore this because it was an interesting saga at the time and it just belongs on this blog. In short: I signed up with a real sketchy sorta-but-not-really broker that offered CFD stock products that functioned similarly to paper trading markets, I slapped them silly with quick micro scalping to the point where they tried to welch on me, and then I had to expose them. Spoiler alert: I took it down because I got the bag.
And what is [redacted]? [redacted] is an “trading education provider” that also gives you access to a prop trading account where you can trade CFDs (read up on that if you are unfamiliar). Watch a trading video on YouTube without ad blocker and you’ll see they are advertising aggressively. [Redacted] is their spokesman/owner. As an aside, I like CFDs and I don’t think there’s anything wrong with them conceptually. I first traded CFDs on Bitmex and made a lot of money there.
Two months ago, I signed up for a [redacted]
package. I was able to trade on their sub-account, provided by [Redacted]. I made a lot of money. Perhaps I made too much money (I know right–that shouldn’t even be a thing for a trader) because they did something about it. For two trading days, they overcharged me with excessive routing fees, effectively clawing back $58,820 in profits over two days of trading. The agreed upon routing fee
is .0015/share and over the two days in question, they charged me .025/share — more than a 1500% overcharge.
Screenshot below (click for bigger picture).
Imagine the feeling of netting over $50,000 in a day only to log on later and see almost all of it wiped away from fees. Sickening.I called them up and they told me my profit was “invalid”. Upsetting. More details below.
I wasn’t sure what to do after that. I didn’t want to go on some public crusade just yet. Initially I just wanted to exchange intel with other traders who had the same issues. I searched up [redacted]mentions on Twitter and a guy named [Redacted] claimed to know other [redacted] customers who got screwed and was about to post a negative video. I DM’d him in an effort to exchange some info. Just to reiterate, I have zero affiliation with [Redacted] or his businesses. I have no prior relationship with him. He tweeted the info out there and stirred up the hornet’s nest without my permission but nonetheless here we are.
[redacted] challenged [Redacted] to an open debate because he seems willing to defend his company and their practices. Well, now I’m challenging [Redacted] to an open debate so he can tell it to my face why it was ok for him to gouge me with $58,820 in routing fees.
FAQ — Questions and Answers
Q: Why are you, an experienced professional trader, trading at this bucket shop that is marketed for total newbs who are under PDT?
A: Someone told me about [redacted]‘s CFD trading model, and about the features that they were marketing to customers on the advantage of trading CFD, and I concluded that there was an opportunity to make multiples of my initial deposit. Knowing nothing about the company and knowing full well it could fold overnight, I nonetheless thought the potential reward was worth the risk–particularly since there had been proof that other traders had received payouts. I don’t need [redacted] to make a living as I have other brokers to trade real stocks and have been doing so profitably for 8+ years.
Q: How did you make so much money on [redacted]?
A: I am just buying low and selling higher, as well as selling high and buying back lower. I watch for momentum to gauge short-term price movements. There is no fancy arbitrage nor did I discover some secret technical glitch. I simply use the features (key word: feature, not bug) that [redacted] markets to all prospective customers–such as high leverage, zero slippage trading and zero restriction on shorting stock. I didn’t use anything that [redacted] didn’t allow by design. Fair game in my opinion.
Q: How did they stop you from what you were doing?
A: They re-routed my platform from CFDs to the real equities market after October 22nd–my orders were actually showing up on the market and my executions had to conform to regular market liquidity conditions. This has happened to many other traders who became profitable. I purchased [Redacted] specifically for these features, features that they aggressively market, that are unique to them. I can trade regular equities on my own broker, why would I sign up for that? We purchased a given product (CFD trading) but were instead switched to an entirely different product (equities trading). They never notify you about this change, you just find out on a given day. You push for some answers, you won’t get one because the account managers delay and obfuscate everything they can.
In [Redacted]’s response video, he claims this switch never happens around the 33:43 mark. The explanation is misleading and entirely semantics at best, and an outright lie at worst. At the 34:08 mark, he states that the broker “can route all your orders to an exchange”. Whether the position is still technically CFD because they print you a CFD position 1 millisecond after filling their own shares is not the point. What matters is that the platform mechanics are demonstrably different. There is no more “zero slippage instant trading”, all the shorting restrictions are back in play, and your orders affect the real market whereas they did not before. That is what the traders who have been switched are complaining about. Here is a video demonstrating how orders now appear on the level II after being switched to equities.
Q: [Redacted] claims not to be a broker, so what exactly is the function of the sub-account?
A: They claim it is more like a proprietary trading account (shared capital) than a broker. A broker would love for their client to trade 2 million shares. A prop trading firm would love it if their trader made over $50,000 in a day. It doesn’t seem like they appreciate either.
Q: How did [Redacted] explain to you why your fees were so much higher than the agreed upon price of .0015 in your contract?
A: I spoke to the account supervisor. He said my profit was invalid. He said I was trading too much size (with the buying power *they* provided me) and it was costing them too much money according to their “risk management department”.If what they are saying is the cost of my hedging my position with real stock is too high and must be passed on to me, they are basically making me pay for their cost of doing business. In that case, should I pay for their rent and electricity as well? Their incompetence at executing their business strategy should not be my burden. Hedging is their business, not my problem.
Oh, by the way. No matter what [Redacted] or anyone at [Redacted] says, let me be clear. Volume isn’t the issue. Price isn’t the issue. Thin stocks aren’t the issue. Hard to borrow stocks aren’t the issue. Anyone who says otherwise doesn’t know what they are talking about. I could trade high volume stocks. I could trade less than 100k shares a day. I could trade stocks over $20. I could trade stocks that are easy to borrow. I will still make money. In fact, if [Redacted] was willing to route me back to true CFDs (the product I paid to use) and let me trade under all those price/volume/stock restrictions for one year, I will forgo the $58,820 that was unfairly withheld from me. They supposedly implemented all these changes to mitigate their risk–everything should be fine now, no? They want to paint a picture that I “abused the system”. I think that’s bogus. I made money because my trades went in the right direction. I traded more volume because who wouldn’t trade more if they kept making money?
It’s funny–when you sign up, [Redacted] e-mails you about all these videos and seminars and live trading rooms to learn about markets and learn how to trade. I’m curious if there are any materials from [Redacted] on how CFDs work and how brokers are supposed to hedge customer positions and how if you trade a certain way or a certain stock, the broker loses too much money. Do the account managers or the education material cover any of that? I didn’t realize it was my job to factor that in my trading.
Q: Is there any written guideline on what exactly constitutes “abuse”?
A: No, there isn’t. Maybe it’s some kind of honor system where you shouldn’t make too much money or it’ll hurt [Redacted]’s feelings.
Q: BUT BUT… IT’S NOT POSSIBLE TO TRADE 2 MILLION SHARES IN A DAY!? You must be an institution/market maker/HFT/DDos-ing Hacker, right?! [Redacted] isn’t meant for you, you scammed them!
A: I have no idea how to program or hack anything. I’ve never worked for any institution. I’m just a button pushing human.
Q: Do you think [Redacted] actually hedges their CFD positions with stock?
A: Maybe? I have my doubts that it’s as consistent a practice as [Redacted] claims but these thoughts are speculative. I would often trade into a large position on the stock and fail to see any corresponding activity on the stock in the next 2-10 minutes. You would think if I took a large position on a slow tape, I’d see real orders hitting the market soon afterwards as the theoretical “[Redacted] black box” tries to hedge out my risk. Maybe it’s manually done but the risk-hedging trader ate a bad burrito that day.
Prove me wrong [Redacted], and show executions from the broker that correspond to our CFD positions. Show what happened on my all trades in detail and explain why these supposed broker costs added up to $58,820 and not $11,373 or $5,603 or whatever. I traded seven tickers, some tickers at $8, some at $80, some with a lot of a volume, trades in both directions, with varied size and with slightly different execution methods. You’re telling me every distinct trade conveniently cost the broker an extra .025/share? Don’t just hand wave everything away with broad claims like “he traded too many shares and that’s BAD!” You’re an educator, educate me.
Q: So let assume they are hedging their positions and it cost them a lot, what now?
A: Either way I think it’s unethical. Either they are lying about hedging the CFDs at all or they are hedging inadequately and then arbitrarily passing through their business costs to the trader as they see fit (i.e. whenever someone makes too much money). We agreed upon a cost of doing business and that was .006/share in “commissions” and .0015/share in routing fees. Apparently it wasn’t enough for them.
Q: Are they even they allowed to do this?
A: I don’t know what they’re “allowed” to do. There is a lot of loose language (in their favor) in the Service Agreement but I don’t see anything about hedging costs or increased routing fees in there. Buyer beware if you are a prospective [Redacted] customer. They have all the power and you have none. They don’t care if you report them to the SEC. [Redacted] is based in Seychelles, which is a country that I didn’t even know existed until now. Make a little bit of money, they are happy to use you as an example to establish legitimacy. Make too much and they will change how things are supposed to work, never notify you, never respond to you, and then come up with excuses if their practices are exposed on social media.
Q: Why didn’t [Redacted] contact you on these rule changes? No phone call or e-mail?
A: The account supervisor Ryan Chase tried to make an analogy that it was no different than a bank moving money around their internal accounts, without needing to inform every single customer in real time. Seriously.
Even if you want to take [Redacted]’s side and label whatever I did as “abusive”, you still have to understand that I was basically trading high volume in large positions without understanding my true cost or true risk for an entire day. How can you properly function as your own risk manager under such circumstances? A little bit of real-time communication and I would have complied. I was, until that point, satisfied with the [Redacted] experience. Imagine if I hadn’t generated all those gross profits to off set these artificially high fees–one mistake or adverse move could have wiped out the entire month’s profits. If I had “only” grossed $33,500 (roughly half what I made), it would have actually been a disaster of a day. I have a feeling that they wouldn’t have said my losses were “invalid”.
Q: Aren’t you afraid that [Redacted] won’t pay out your remaining profit in retribution for going public with all of this?
A: If [Redacted] wants to be vengeful, they can refuse to pay me the profits I still have in my account. To their credit, they have paid me once, so far. What they don’t tell you upfront is that there is a $25,000 maximum for the first 3 withdrawal windows–a new “policy change” for “tax and regulation reasons” that just happens to keep your profit in their bank a bit longer. I would not put it past them to retaliate, but I don’t want to stay silent any longer. If they do this, I will show proof and it will be impossible for them to recover from the optics. Pay your traders what they earned, [Redacted]. It’s the right thing to do.
Q: What do you think is the fair outcome here?
A: [Redacted] pays me what is rightfully mine from those two trading days in question (October 22nd and October 19th), on the agreed upon routing fee price (.0015 per share, rather than the .025/share I was charged). That number is $58,820.
This number represents the sum of all excess routing fee charges. Then they can change their platform or cost structure however they want. And be transparent about it. It would be the smart thing to do on their end. They should actually thank me for exposing them to situations where they are too inadequate to mitigate the risk correctly. They pay me what’s owed and I will take down this post.
Q: Is [Redacted] a scam?
A: I will let you decide on that.
Let it be known that I am not making any wild, unverified accusations. I am simply telling you about my experience.
1. I was charged .025 in routing fees rather than the .0015 in my contract, on October 19th and October 22nd. The sum of these excess routing fees amounts to $58,820.
2. They changed my platform from CFDs to equities.
[Redacted] and [Redacted] can try to explain why they did what they did, but they can’t deny or dispute these events.
I don’t think it’s right. They obviously think otherwise. We can let the public decide.
Ball’s in your court [Redacted]