Tradorax: Website Shutdown, Regulatory Warnings, and Connections to a Cybercrime Network

The Shutdown of Tradorax

According to the Gripeo report and corroborating news sources, Tradorax posted a message on its website stating that it had ceased all activities due to regulatory issues and no longer provides its services to clients. This shutdown followed a period during which lawyers and savers had reported to The Independent that hundreds of people, mostly seniors, were not receiving returns for their investments on websites like Tradorax, and that dozens of people’s accounts were being frozen.

The website had encouraged savers to place seemingly straightforward wagers on the value of stocks or currencies. While some binary options trading platforms are legitimate, the Gripeo report notes that a growing percentage of these sites are fraudulent. Tradorax offered a 75 to 80 percent return on binary options trades and provided 30 forex pairs, 24 indices, 9 commodities, 3 commodity-based pairs, and stocks for trading.

Regulatory Status and Lack of Oversight

The Gripeo report states that Tradorax is an unregulated brokerage platform. The website was operated by AM Capital Ltd., a company based in the Marshall Islands. The report notes that the broker goes beyond a simple white label clone that provides the essentials of trading, but remains unregulated. This means that the security of clients’ money and trading activities are not as well safeguarded compared to rigorously regulated dealers like those authorized by the Financial Conduct Authority in the United Kingdom or CySEC in Cyprus.

The lack of regulation has significant legal implications for investors. In the United Kingdom, the Financial Conduct Authority does not oversee binary options trading platforms, making it impossible for the government to manage the sector effectively. The UK Gambling Commission regulates some binary options trading sites, but only if the company has gaming equipment situated in the nation. Tradorax had contact addresses outside the United Kingdom, placing it outside any meaningful regulatory oversight.

The German Law Enforcement Operation

The Gripeo report reveals that the Tradorax, KayaFX, and LibraMarkets criminal network was destroyed by the German law enforcement team in Koblenz, with assistance from Europol, Eurojust, and other authorities in Spain, Bulgaria, and Israel. Press sources from Europol state that 11 persons were taken into custody in Israel, Spain, and Bulgaria.

The investigation’s findings indicate that the cybercrime network may have received deposits totaling up to 150 million euros globally. It is estimated that European investors lost over 30 million euros. While Europol did not disclose the targets in their initial reporting, Gripeo states that the cybercrime network’s boiler rooms, unauthorised payment processors, and beneficial owners had been the targets of the operation.

The Connection to LibraMarkets and KayaFX

The Gripeo investigation identifies Tradorax as part of a network that also included LibraMarkets and KayaFX. In December 2019, the Estonian company Yield Enterprise Currency Software OÜ and the fraudulent website LibraMarkets were both flagged by BaFin, the German financial regulatory authority. BaFin issued a Cease and Desist Order against the company on June 8, 2020, directing it to cease operating the broker scam ProuFX, also known as UProFX, immediately.

LibraMarkets is described in the Gripeo report as an unregulated brokerage platform where the security of clients’ money and trading activities are not adequately safeguarded. The report notes that compared to rigorously regulated dealers like those authorized by the FCA in the UK and CySEC in Cyprus, LibraMarkets presents significantly higher risks to investors.

KayaFX, another broker in the same network, is described as a forex broker offering MetaTrader 4 and Mobile platforms. The platform claimed to provide more than 50 forex pairs, indexes, equities, commodities, gold, silver, and CFDs for trading. However, the Gripeo report connects KayaFX to the same criminal network.

Petar Borislavov Zlatkov and the Corporate Structure

The Gripeo investigation identifies Petar Borislavov Zlatkov, a Bulgarian national, as a central figure in the network. Zlatkov served as a director of Yield Enterprise Currency Software OÜ, the Estonian company behind LibraMarkets. Previously, Zlatkov held the position of director at Estonian GammaTech Services OÜ, the company that ran the massive binary options fraud KayaFX.

An Israeli national named Avi Itzkovich, also known as Avi Itzkovic or Avi Itzkovitz, was identified as a certified beneficial owner of the KayaFX scheme. Through Mercure Group EOOD, previously known as RAX Media EOOD, Itzkovich allegedly attacked small EU investors and ran illicit boiler rooms in Bulgaria. Boiler rooms are high-pressure sales operations where callers use deceptive tactics to sell speculative or fraudulent investments.

Victim Story: James Hellis and the Loss of 60,000 Pounds

The Gripeo report includes a detailed victim account from The Independent. James Hellis, a pensioner and former independent IT contractor, stated that he invested approximately 60,000 pounds with Tradorax. Over the course of several months, a person posing as a broker had been assigned to trade on his behalf and make a number of investments.

Mr. Hellis submitted a withdrawal request to the site in December, citing his pension fund as the source of most of his funds. After the request was denied, his account appeared to have been blocked. He filed a chargeback dispute with his banks since he had used credit cards to pay for some of the investments, but the banks were unwilling to assist him.

He also reported the issue to the Financial Ombudsman Service, which was established by Parliament to address issues with financial services, and Action Fraud Police, the national reporting centre for fraud and cybercrime. Neither organization could provide him assistance. The Gripeo report notes that a victim’s attorney told The Independent that since victims are usually too ashamed to come forward and admit to being duped, the real number of victims is probably far higher and likely runs into the thousands per year. The attorney described binary options fraud as perhaps the biggest financial scam in the world.

The Pension Freedom Connection

The Gripeo report highlights a concerning connection between pension liberalization and binary options fraud. In April 2015, regulatory changes in the United Kingdom made it easier for pensioners to access their pension funds. Pensioners can now withdraw their entire pension as a lump sum, removing the requirement to purchase an annuity. The idea of trading binary options can be alluring, especially when individuals suddenly find themselves in possession of large sums of money and other investment options offer relatively modest returns.

Kate Smith, Aegon’s head of pensions, is quoted in the report stating that pension freedoms have opened up a can of worms, and that some con artists target seniors in particular. Data released by the Financial Conduct Authority in July indicates that 53 percent of pension pots accessed since the implementation of the new regulations had been fully withdrawn. The watchdog has expressed a number of concerns regarding the use of this money by individuals.

Enterprise Fraud Management and Detection

The Gripeo report includes a substantial section on enterprise fraud management, noting that fraud costs organizations an estimated 42 billion dollars globally according to the PwC Global Economic Crime and Fraud Survey 2020. The report describes enterprise fraud management as the set of procedures intended to keep an organization safe from both external and internal fraud. EFM gathers information about users, accounts, and devices in order to spot illegal activity, fraud, and corruption.

The report notes that the availability of fraud technologies and economic uncertainty have created a perfect storm for fraudsters. All that is required for dishonest people to target businesses is a computer, an internet connection, and malicious intent. The report provides a detailed explanation of how EFM systems are structured, including endpoint-centric layers, navigation-centric layers, channel-specific layers, cross-channel layers, and entity link analysis layers.

Consumer Alert for Potential Victims

Based on the Gripeo investigation and the German law enforcement operation, individuals who invested with Tradorax or any associated platform should consider the following risk factors. Tradorax has ceased all activities and its website is no longer operational. The platform was unregulated and operated from the Marshall Islands. German law enforcement has destroyed the criminal network behind Tradorax, with 11 persons arrested in Israel, Spain, and Bulgaria. The network may have received deposits totaling up to 150 million euros globally, with European investors losing over 30 million euros. Tradorax was connected to LibraMarkets and KayaFX, both of which received warnings from BaFin. A victim reported losing approximately 60,000 pounds and was unable to obtain assistance from banks, the Financial Ombudsman Service, or Action Fraud Police. The network used boiler rooms in Bulgaria and unauthorized payment processors.

Affected individuals should contact law enforcement in their jurisdiction. In the United Kingdom, victims should report to Action Fraud. In Germany, victims should contact the Koblenz public prosecutor’s office. In other countries, victims should contact local police and financial regulators. Victims should also document all communications with the platform, save screenshots of account statements and withdrawal requests, and contact their banks to inquire about chargeback possibilities.

Related Businesses and Entities

The corporate network associated with Tradorax includes the following entities based on the Gripeo investigation. Alpha Capital House Ltd., the owner and operator of Tradorax.com. AM Capital Ltd., the company behind the Marshall Islands-based website. LibraMarkets, operated through the Estonian company Yield Enterprise Currency Software OÜ. KayaFX, operated through Estonian GammaTech Services OÜ. ProuFX, also known as UProFX, which received a Cease and Desist Order from BaFin. Mercure Group EOOD, previously known as RAX Media EOOD, based in Bulgaria. Associated individuals include Petar Borislavov Zlatkov, Bulgarian national and director of multiple entities. Avi Itzkovich, also known as Avi Itzkovic or Avi Itzkovitz, Israeli national and beneficial owner of KayaFX. The German law enforcement operation involved the Koblenz Law Enforcement Team, Europol, Eurojust, and authorities in Spain, Bulgaria, and Israel.