3 August 2017, AtoZ Markets – Beginning of 2016 was scandalous for Fortress Prime company ending the CEO Mitch Eaglstein’s career with a dark page, that he had to resign. In Cyprus alone, Fortress prime failure to meet business responsibilities caused literal heart attack to some of the Cyprus based broker owners. There were also people getting arrested since they failed to proceed their client withdrawals. Many big Forex industry names got as much as $8 mln negative balance and some small entities even completely disappeared from the Forex industry due to Fortress Prime. So why is Fortress Prime CEO Mitchell Eaglstein in Cyprus again? What does he want to achieve with Forex Development Corporation (“FDC”)?
We talked to some of the broker directors who suffered from Fortress Prime failure, all commenting one simple wording:
“How can he even be walking around in Cyprus?”
Although, Mitch is not and was not the Fortress Prime owner, many of these industry leaders do not want him around. One of our contacts said:
“I had a heart attack. Ended up in a hospital because of Fortress Prime and Mitch was their CEO!”
Although, some of the victims, mention Mitch Eaglstein name directly. AtoZForex team acknowledges clearly that Mitch Eaglstein is not solely responsible for the client and broker losses due to Fortress Prime. However, since Mitch Eaglstein was the Fortress Prime CEO when all these issues took place, his appearance in Cyprus attracts attention. Why now? What has changed?
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Fortress Prime failure story
On the 14th of February 2016, AtoZForex team talked to then the Operations Manager of Fortress Prime, Sara (recording of the call is in our archives). We discussed why Fortress Prime was delaying withdrawals of institutional and retail clients.
Then, the company answer was:
“We made some bad business decisions. Some of the clients received large credit lines by the previous management, without depositing the required margin.”
It turned out that (or at least Fortress Prime team told) that the company gave multi-million credit line to the CEO's or Shareholders’ contact or contactss. Fortress representative continued that they kept on providing credit line to these clients. However, no deposit was made by these clients. Thus, lack of risk management intoxicated the remaining of the client funds.
Just days after the call Fortress Prime literally disappeared and in July 2016 Dubai police arrested the Fortress Shareholder, Hamed Ahmed Elbarki/Mokhtar. As a result of the Fortress Prime failure case, many Forex brokers in Cyprus lost millions of dollars. Some of these brokers’ losses were so high that they had to stop their operations, such as BCFX. Even FXCM lost as much as $8 mln due to Fortress Prime and had to cover the losses from their own pocket to pay their clients.
Fortress Prime victim brokers
Many small scale brokers suffered as a result of Fortress Prime disappearance. Most of the Fortress Prime victim brokers were originating from Lebanon, UAE and Cyprus. Fortress Prime attracted their victims with attractive terms. Market environment and lack of Tier 1 bank access due to lack of capitalization for small brokers boosted their sales as well.
During the peak time of the Fortress Prime withdrawal issues, the company over and over referred to the royal family of the UAE, Sheikh Mohamed Bin Sultan Bin Hamdan Al Nahyan. In February of 2016, Fortress Prime was presumably in a process of obtaining $200 million from the UAE Royal Family. However, this was nothing, but a diversion!
Seems like, Fortress Prime didn’t really disappear. The local entity in Dubai continued to operate under the name of Fortress Dubai. Meanwhile, they took the Fortress Prime website down. Fortress Dubai even had the same address and contact details as the infamous Fortress Prime.
Why is Fortress Prime CEO Mitch Eaglstein in Cyprus again?
Fortress Prime CEO Mitch Eaglstein joined the company in January of 2014, during the company establishment. Meanwhile, he quietly disappeared from the management in February of 2016.
Despite Fortress Prime ruining many lives and trashing brokers, former Fortress Prime CEO Mitch Eaglstein appeared in Cyprus. Ok, he is no longer connected to Fortress Prime and has nothing to do with FP. According to our Broker partners in Cyprus, Mitch Eaglstein aims to establish himself and his new company in Cyprus. He has a full agenda, representing a technology company, Forex Development Corporation (“FDC”).
While Forex Development Corporation (“FDC”) appears to be a US entity, the company launch was on the 29th of June 2016, in Tel Aviv, Israel. They are not subject to any regulation neither.
What surprised us is Mitch Eaglstein collaboration with an experienced CySEC Forex broker iForex. The retail Forex Broker, iForex does not offer any institutional services, nor inter-bank liquidity solutions. So we will look into investigating how iForex and Mr. Eaglstein collaborate.
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CySEC brokers must have liquidity provider due diligence
We would like to also know how CySEC will react to this new appearance. In the recent CySEC update, the local regulated recommends brokers to get serious with their counterparts. So, how will those brokers operate with Mitch Eaglstein and carry out proper liquidity provider due diligence? If he is offering liquidity solutions, of course!
Brokers with CySEC authorization can still work with non CySEC / Non-EU liquidity providers. However, they must perform proper due diligence. The non EU liquidity provider due diligence requirements include the following:
- The LP should clear all of its trades with an EU licensed entity
- The LP should demonstrate that they have 10% capital ratio of their exposure
- Alternatively, brokers should have extra EUR2 mln on their balance sheet for their A book clearing. This is excluding their market maker balance sheet.
The only thing we can recommend for Brokers and FinTech institutions is to be careful while selecting their LP partners. Having a ten cents on a million might seem attractive, however will that 10 cent extra will jeopardize your operations?
AtoZ Markets tried to communicate with Mr. Eaglstein, however we have not heard anything from him. We will try to meet with Mitch Eaglstein to get his perspective too.
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