MyForexFunds Assets Frozen – What can we Learn From It?

  • September 3, 2023

If you keep an ear to the ground in the online forex trading and prop firm scene, you’ll have heard the recent news about MyForexFunds having their assets frozen, pending charges from the CFTC. MyForexFunds is, or should we say “was”, one of the industry’s largest prop firms, providing traders with funded trading accounts to trade large capital. We have expected the regulators to come knocking on MFF’s door for a good few months now, so this news is not surprising! In this article we are going to discuss the charges against MyForexFunds, look at why this is happening, what will happen next and how you can avoid being caught in prop firms going under! So, let’s get into it!



MyForexFunds Assets Are Frozen – Why Did This Happen?

MyForexFunds is a trading name of Traders Global Inc, a company owned by Murtuza Kazmi – a well-known figure in the forex industry.  As of the 29th August 2023, the company had a statutory restraining order signed against them, freezing their assets and requiring all books to be submitted to the CFTC for examination. We’ll be hearing more about the findings on September 11th, 2023 after a preliminary injunction hearing is held.

As stated by the CFTC in their complaint filed before the UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY:

  • MyForexFunds claims that ‘we only make money when you do’, when in fact, this is completely untrue.
  • MyForexFunds is actually the counterparty to all trades taken by customers.
  • MyForexFunds is alleged to be purposely minimizing the chance of customers being able to profitably trade on their challenge/funded accounts. This is achieved by terminating customer accounts, misleading trade commissions and using custom software to ensure trades are filled at worse prices with larger spreads. Thus, leading to increased customer losses and decreased profits for traders.

It’s worth noting that regulatory bodies such as the Securities and Exchange Commission (SEC) typically follow a due-diligence process before taking punitive actions against firms. They generally issue multiple letters requesting information, and only after non-compliance or ongoing violations do they initiate shutdown procedures. Therefore, any regulatory action against a firm like MFF should not come as a complete surprise to its management, although it might to its traders.

The Two Types Of Prop Firm Business Models

In the online prop firm space, there are fundamentally two business models. The first business model, run by MyForexFunds, is a ponzi or pyramid-like style model, redistributing losing traders fees to profitable traders looking to withdraw.  

The second business model, run by Lux Trading Firm, is based on real market activities, using real trading capital. Profitable traders are paid out from profits on their trades – not from losing traders fees.

Let’s look at this in a bit more detail, as it’s crucial to understand the downfall of MyForexFunds…

The MyForexFunds Business Model

MyForexFunds has managed to convince 135,000 customers to sign up since November 2021 and turned over at least $310,000,000 in trading fees during this time. Little did these traders know, there was a minimal chance they would be able to succeed with this specific firm. MFF uses a ponzi or pyramid-like style business model. The model is elementary, but extremely unethical. It looks like this:

  • You sign up for a trading challenge, hoping for funding.
  • You succeed in the trading challenge, and you’re given login details to a demo account.
  • You trade profitably on the demo account, then request a withdrawal.
  • MFF never made ‘real money’ on your profitable (simulated) trades, meaning they need to pay your trading withdrawal from the sign-up fees of new traders.

 Thus, MFF needs a constant stream of new traders to pay out profitable traders. In fact, the profitable traders taking withdrawals are costing MyForexFunds a lot of money – as they aren’t able to profit from winning traders. This is where the manipulation comes into the ponzi style business model. To increase profits for the company, they require more traders to be failing challenges and fewer traders to be taking withdrawals. This is why MyForexFunds is allegedly manipulating spreads, misleading customers regarding commissions and terminating customer accounts wherever possible – these methods all increase the profit for the prop firm. This business model is incredibly unethical and used by the majority of the ‘demo trading’ prop firms you see in the industry.

The Lux Trading Firm Business Model

There is another prop firm business model, used by Lux Trading Firm, that has been successfully operated in both brick and mortar and online prop firms for over four decades. This business model uses real capital, instead of demo trading accounts. It follows this process:  

  • You sign up for a trading challenge.
  • You succeed in the trading challenge, and you’re given login details to a real money-funded account.
  • You trade profitably on the live account, then request a withdrawal.
  • Lux Trading Firm pays you your share of the real profits realized in the brokerage account. There is no loss incurred to Lux Trading Firm to process trader withdrawals!

In this model, the company profits when the trader profits, and there is no redistribution of losing traders’ fees. As a result, the prop firm is completely aligned with the trader and genuinely only succeeds when they work with profitable traders. Thus, Lux Trading Firm provides great trading conditions, low spreads, education, mentorship and favorable trading rules to ensure that as many profitable traders are created as possible. This is how the brick and mortar prop firm industry works. If Lux Trading Firm never received another trader through the doors, it would not affect existing profitable traders. However, if that happened to MFF, they would need to shut down within days!

How To Reduce Risk When Trading With Firm Props

You can greatly reduce your risk when trading with prop firms if you trade only with real money prop firms. Many of the largest prop firms in the industry are using the same ponzi style business model as MyForexFunds. It’s only a matter of time before the demo/pyramid-style prop firms get a knock on the door by the regulators, as MyForexFunds has done already. The only way to reduce your risk is to trade with a real money prop firm – as this business model has no elements of Ponzi.

Lux Trading Firm, although currently not subject to specific regulatory oversight — largely because no such regulations exist for our type of business — is confident that should regulations be imposed, compliance would not be an issue for us. Our business model is built on a foundation of real market activities, and is fundamentally different from virtual money trading schemes.

 In Summary – Why Did MyForexFunds Get Its Assets Frozen?

 In conclusion, MyForexFunds is being investigated due to unethical business practice, resulting in some 135,000 traders being misled, whilst the CEO has allegedly been purchasing luxury homes, cars and transferring tens of millions of dollars to his personal bank accounts.  MyForexFunds is a demo trading prop firm, much like many others in the industry, and it’s a matter of time before the regulators knock at the doors of all of these unethical, Ponzi-style firms.

If you’re looking to become a prop firm funded trader, work with a real money prop firm like Lux Trading Firm. When regulators are imposed, compliance will not be an issue for prop firms that give traders live trading capital.