In 2011 Instaforex and one of it’s introducing brokers ZTradeFX LLC was sued by the CTFC for breaking US regulations by accepting US Clients. The Dodd Frank act prevents brokerages who do not have the adequate US regulation from accepting clients in the United States of America. However due to the fact that Instaforex parent company InstaTrade Corporation is a offshore entity based in the British Virgin Islands, InstaTrade Corporation never appeared in court and was never financially sanctioned for their breach of US regulations.
Of course Instaforex claims complete innocence they state that it was the fault of the introducing broker. Going onto claim that the Introducing broker ZTradeFX LLC. was in fact part of their partnership program but had no active members with Instaforex. Thus meaning the complaints lodged by the CTFC were completely fictitious. However, it appears highly unlikely that the CTFC would launch legal action in a case were no US Clients had actually opened accounts with Instaforex through ZTradeFX LLC. Especially when it explicitly stated in the legal paperwork that InstaTrade Corporation would be fined $140,000 for every breach of regulation after the 23rd of October 2012. So if there had been no breaches after the 23rd Oct 2008, then InstaTrade Corporation would not have to pay any fines whatsoever.
However as Instaforex i.e InstaTrade Corporation did not respond to the suit the NFA sanctioned Instaforex in the following way:
TRADING PROHIBITION 09/14/2011
STOP SOLICITING 09/14/2011
OTHER (SEE NARRATIVE) 09/14/2011
PERMANENT INJUNCTION 09/14/2011
MAY NOT APPLY TO REGISTER 09/14/2011
FINE $140000 09/14/2011
MAY NOT OPERATE AS PRINCIPAL 09/14/2011
This means that Instaforex may not apply for a US licence in the future at least until the other issues in the suit are resolved. This is also makes bans Instaforex from soliciting or trading in any form within the United States of America. However, Instaforex still protests its innocence and claims that it never had any intention to operate in the US markets.
While Instaforex is still operating and is still profitable for its offshore owners, this ruling by the CTFC and NFA will have certainly further damaged it’s already battered reputation.
