$ 75 million in fines for brokers in Australia and a leverage cut announcement

The Federal Court of Australia ordered AGM Markets Pty Ltd (AGM), OT Markets Pty Ltd (OTM) and Ozifin Tech Pty Ltd (Ozifin) to pay a total of $ 75 million in fines. The penalty is symbolic, however, because the companies are in liquidation and there is not even enough wealth to cover their clients' losses. This is likely to only accelerate the reduction of leverage for individual investors in Australia.

AGM has to pay $ 35 million in fines, and OTM and Ozifin must pay $ 20 million. AGM Markets was a owning broker ASIC licenseoffering trade binary options. It operated primarily under the brand name AlphaBinary in Australia and AGM Markets Ltd. in Cyprus, which later changed its name to Maxigrid Ltd. He also tried his hand in the UK, but was banned there at the beginning of the year.

However, it is hard to expect that the fine will be paid. All three companies are either bankrupt or liquidated. They don't even have the means to pay their creditors.

Consumer protection - "The decision is inevitable"

Judge David Beach of the Australian Federal Court, who imposed a penalty on AGM, OTM and Ozifin in a comment to the judgment, wrote, among other things, that the industry is too lax in the use of leverage.

"CFDs can serve legitimate investment and security purposes. However, most retail clients lose money, often due to excessive leverage (…) Importantly, none of the defendants purchased CFDs for hedging purposes. They were misinformed speculators " - said David Beach of the Federal Court of Australia.

He even compared investors using high leverage to heroinists, noting that derivatives are complex instruments and risky investments, and as a result of such behavior the clients of each of the three accused lost significant amounts of money. The customers' total trading losses were approximately $ 32 million. What's more, the losses of clients simply translated into the income of the punished companies.

“- ASIC is getting closer to issuing new intervention measures for CFD products. Maximum leverage restrictions for retail traders, as was the case in the UK and EU, as well as Japan and the US. The intervention will in some way contribute to the protection of consumers - and the decision is inevitable " ASIC Executive Director of Enforcement Sharon Concisom said in an interview with the Australian Financial Review.

How dishonest brokers worked

The operating system of the convicted companies was very similar. Already in 2018, ASIC warned investors against AGM Markets, OTM Markets and Ozifin. On November 9, 2018, ASIC canceled AGM Markets' Australian Financial Services (AFS) license after an ASIC investigation found AGM was ignoring key handling requirements. Former director of the company, Yossi Ashkenazi, was also punished by a ban from holding managerial positions in financial companies for the next 8 years. On October 11, 2019, the Australian federal court ordered the liquidation of AGM Markets Pty Ltd, OTM Markets Pty Ltd and Ozifin Tech Pty Ltd. It also appointed liquidators.

It was then that e-mails and documents that were secured in all three companies came to light. Managers directly recommended to their employees that they should gain the trust of their clients, especially those who are least oriented in financial markets, while encouraging them to make the most frequent and highest-cost investments. Each loss of customers was the company's profit, and bonuses paid to employees depended on it.