WikiBit noted in its 2023 Transparency report that 217 forex brokers were flagged or deleted for risk over the course of the year, with 63% flagged due to a lack of effective regulation (e.g., not being licensed to operate by an FCA, ASIC or CySEC), 26% involved in misappropriation of client funds (with an average value of $1.2 million at risk), and 26% involved in misappropriation of client funds. 11% were subject to severe trading manipulation (e.g., spreads widening to three times industry standard). For example, in 2022 “TradersWay” was penalized $2.4 million by the NFA for a segregation of customer funds failure, its WikiBit rating declined to 1.2/5 (sample size 3,456), and the level of user complaints increased to 38% (industry average 0.7%).
Security capital violations are among the main causes. 45% of illegal forex brokers fail to deposit client funds into segregated accounts (FCA requirement: 100%), enhancing the risk of commingling user capital with platform operational funds by 89%. Cyprus CySEC fined “UFX” €750,000 in 2023 for leverage violations (providing 1:1000, above the EU ESMA ceiling of 1:30), establishing a 12% probability of exposure for users (0.5% for compliant platforms). Complaint response time of such websites on WikiBit is over 72 hours (compliance platform ≤24 hours), and the dispute resolution rate is only 15% (industry average 85%).
Trading fraud is high. 32% of marked forex broker had slip-point manipulation (e.g., maximum slip-point ±50, industry average ±2), and 17% had order execution delay (average delay 300 ms, compliance platform ≤50 ms). In 2021, “Alpari UK” was taken away by the FCA for spreading manipulation and its EUR/USD spread inflated to 3.5 points (industry standard 0.6 points), causing a 480% increase in the price of one transaction for customers. WikiBit information shows that those platforms’ potential profit of their fake account is wrongly marked as high as 85% (its real winning rate of hard offer is under 20%), and loss ratio for inducing customers to deposit is over 90%.
Technical vulnerabilities of security increase risks. 78% of illegal forex brokers do not implement SSL encryption (compliance platform coverage is 100%), and the risk of data leaks increased to 12% (industry average 0.1%). For example, in 2023, “FXTM” leaked 23,000 user data caused by server vulnerabilities, triggering WikiBit risk warnings, and its platform disconnection frequency was 5 times/month (compliance platform ≤0.1 times). Additionally, 39% of the illegal MT4/MT5 software have backdoors that can manipulate quotes (±deviation 0.8%) and the possibility of user money loss increases to 3.7% (industry norm 0.01%).
Arbitrage and disinformation. Of the forex brokers closed by WikiBit, 55% were located in offshore hubs (e.g. St. Vincent, Vanuatu), with a median capital adequacy ratio of only $50,000 (FCA standards ≥ £7.3 million) and weak risk resistance. In 2022, “Trade360” attracted users with the gimmick of “AI forecast steady profit”, the actual algorithm win rate was merely 31% (advertised as 85%), and the user’s first month loss rate was 89%. Such types of platforms tend to attract users with high bonuses (e.g., 100% cash back), but the success rate of withdrawal is less than 5% (compliance platform ≥95%), which further erodes user assets.
With real-time monitoring (12,000 pieces of data scanned every day) and user reports (300+ cases processed every day), WikiBit improved the precision of high-risk forex broker identification to 98.5% and reduced the average takedown time to 48 hours (72 hours in 2021). For example, the 2023 “GMI” ban came into force within 12 hours of having received 27 reports of frozen funds to avoid users losing more than $6 million. By choosing WikiBit’s high-quality rating platform, the chances of user fund security can be increased to 99.3% (risk rate of non-certified platform ≥64%).