More revealing information on the ongoing iOption saga

iOption files for bankruptcy

The news that iOption is indeed going out of business is beginning to sink in. What is very worrying about this development is that this particular broker was considered to be one of the most established in the market and the truth of the matter is that it has been around for a long time, long before the recent upsurge in the number of brokers. What is even more striking is that the parent company of iOption, Scorpid Trading Ltd has only recently, actually on 30th October 2013, obtained a CIF licence from CySEC, rendering it a regulated broker for the whole of the EU, under licence number 218/13. So, how on earth does a company go bust, only a week after being scrutinized by a regulator?

Although the iOption website continues to be up and appears to be running as usual, sources insist that an official announcement on the company’s bankruptcy will be made public very soon. All of these factors paint a very blurred picture. With the best interest of every single trader in mind and equally concerned with every one of you, who might have an open account with iOption and are worried about your funds remaining trapped, or even if you are an affiliate who cannot expect to receive your rights from your former associate, we decided to do our utmost to get to the bottom of this story by snooping around, investigating and pulling some strings.

Our first attempt was to conduct iOption directly or at least get hold of an individual who could represent the company in any capacity in order to get it right from the horse’s mouth. Alas, these attempts were to no avail, although we did manage to piece together some information and arrive to certain conclusions as to what went wrong here. More on that below, however.

Because we strongly believe that timely and reliable information from the competent authorities is preferable to rumours and the only way to responsibly enlighten the dozens of worried, affected traders, the team here at next decide to contact the Cyprus Securities and Exchange Commission as the regulating body, who have recently granted iOption its license to operate in the EU as a Cyprus based Investment Firm. We were particularly interested to find out whether specific provisions are in place for compensating the traders, whose money is trapped in the accounts they held with this particular broker, because we did stumble across information that CySEC is going to cover the deposits in traders’ accounts, although this might take some months to happen, if not more. We wanted to have it officially though because we didn’t want to raise the hopes of traders only to disappoint them afterwards. Unfortunately we haven’t managed to get a specific answer yet, although CySEC has officially and exclusively informed us that they are “already aware of this issue and an official investigation into this matter is currently underway“. They also added that pending this investigation, “no more comments can be made on the subject at this point.

This reply confirms that this is not a story of smoke with no fire and we will be updating you on any statements issued by CySEC on the matter itself or the progress of their investigation.

Next, our team turned their efforts towards the advisory firm Map S.Platis, who assisted iOption’s parent company in gaining their license and obtaining the status of a regulated broker. Invited to comment on the recent turn of events, we managed to obtain an exclusive comment from one of the company’s senior managers, informing us that “Scorpid Trading Ltd was operating in Cyprus under a grace period provided by the Cyprus Securities & Exchange Commission, until it recently received its CIF License. Following receipt of a CIF License, every CIF must abide to the provisions of the relevant legislation, including the fulfilment of all obligations towards clients arising from the provision of investment services. We have no reason to believe why Scorpid Trading Ltd will/should not fulfil its obligations arising from the law.

Although this is a very carefully worded comment, not in the form of an official statement, we appreciate that Map S. Platis were prompt in replying and reading between the lines, we think we can add this information, as yet another piece of the puzzle, in an effort to piece together the whole picture.

So, having pulled our strings and calling in on some favours we can fare an attempt to offer a reasonably possible version of events. The grace period was running out and iOption had to implement certain changes in order to be able to comply with the EU regulations currently in place, as was the pre-requisite for obtaining their licence from CySEC. In order to so they asked their platform provider, SpotOption, to make the necessary amendments. However, the associated software updates were not ready on time and they kept causing problem to existing customers and well as sending away any new ones. Indeed, for the past month, or even more, iOption was effectively closed for business. And in the highly competitive and volatile world of online brokers, this is a recipe for disaster.

What added insult to injury for iOption was the fact that they could not have access to liquid capital, because e-wallet companies Netpay and Liberty Reserve, that are holding thousands of iOption capital in forzen accounts, are on the verge of going bankrupt. Therefore, the company the company was short of cash, and could not and would not pay out their affiliates, allow clients to make withdrawals or even pay their employees’ salaries.

To their credit, they did manage to attract an investor, but appear to have done so under false pretences, since our sources insist that when this investor realized the very bad state the company was actually in, he froze the deal and took his money and run! The last resort was selling the company to another broker, with BBinary being rumoured as a candidate. However, it was already too late. The ills of the company had spiraled fast and got out of hand, the ship was actually already starting to sink and nobody felt like playing hero and trying to rescue what was already deemed a lost case…

Until things are entirely clarified and official announcements are made we will not be entirely sure about the truth and cannot therefore reach any bullet proof conclusions just yet. We will however be following the story and keeping you posted as events unfold. However, we can already discern that this collapse points to the fact that even the most well established brokers can fail dismally and suddenly, through a series of unfortunate events coupled perhaps with misjudgment and mismanagement. With the recent upsurge in the number of brokers competing for our custom, perhaps the time has come for the survival of only the strongest and fittest. We shall see….