FinTelegram and EFRI have sent an open letter concerning Maxigrid and the related broker scams like RoyalsFX or LincolnFX (to name only two) to Demetra Kalogerou, chairwoman of CySEC, and Europol. The claim of The Financial Ombudsman Service of the Republic of Cyprus that CySEC would not be responsible for the crypto activities of the investment firms they regulate is wrong in our view. In addition, Maxigrid also handled bank deposits for scams hance was involved in fraudulent FIAT transactions too. We are not necessarily saying that Maxigrid itself committed criminal acts but we are saying that there is a lot of concrete and circumstantial evidence that makes an investigation in the interest of the many victims absolutely necessary.
Intentional or negligent that’s the question
While CySEC seems to look the other way and/or does not feel responsible for cryptocurrencies and related regulatory violations, the U.S. authorities and regulators like the CFTC are taking a strict and consistent approach to protect investors and the markets (read this FinTelegram report on the BitMEX case here).
In the Maxigrid Case, it is a well-documented and hence indisputable fact that large broker scams have processed their payments in FIAT and Crypto through Maxigrid, a CySEC-regulated company beneficially owned by Roy Almagor.
It is possible, however, that the involvement of the CySEC-regulated Maxigrid in the respective scam activities was not the result of intentional but negligent behavior and KYC/AML procedures were not properly applied. But even if assuming negligence instead of intention, the processing of scam and cybercrime-related payments constitutes a violation of the regulatory requirements and CySEC would have to intervene and investigate. Especially if numerous victims from different EU countries of these scams confirm the involvement of Maxigrid with their documents.
The analysis of the victims’ documents shows that Maxigrid‘s payments for the scams were also processed, although at that time there were already warnings from regulators of various regulatory regimes in the EU. This must be conspicuous in every KYC/AML audit or also be noticed in the AML transaction monitoring.
The Financial Ombudsman’s view
The culmination to date in the Maxigrid case has been the termination of investigations by The Financial Ombudsman Service of the Republic of Cyprus following a complaint from a scam victim who had made his deposits to RoyalsFX scam via BitandBuy from Maxigrid.
Semeli Christophorides of the Financial Ombudsman Office in Cyprus informed the complaining victim that it has indeed been established that Maxigrid operated the BitandBuy platform without permission from CySEC. But for the crypto activities of CySEC-regulated investment firms, the very same CySEC would not be responsible and therefore the Ombudsman would not be involved. Therefore, the investigation of the complaint would be terminated, terminated for good, the emails say. We have not heard this legal or regulatory viewpoint from any other regulatory regime so far.
Welcome to Cyprus where passports and convicted criminals are sold as long as they only invest in Cyprus as reported in the so-called Cyprus Papers of Al Jazeera. These criminals have access to the EU like scammers have access to the EU financial system via CySEC-regulated investment firms.