In recent weeks I've been receiving multiple inquires from traders asking me about a company called Tradenet. First off, I Just want to say that I've never used them and I do not recommend it. I'm informing people about my concern because I believe there are multiple red flags. I know people using this service and have warned them all against it. Tradenet, or as I like to call them (Shadenet) is an "educational" company that lets you bypass U.S. law in order to trade CFD's with the broker TEF Securities (TEFS) in Mahe, Seychelles via Colmex Pro in Cyprus. These locations alone should raise major flags as they are known fraud zones. The model is super enticing for new traders who don't have large accounts. It sucks people into paying thousands for overpriced educational courses and then supposedly allows you to trade with big buying power CFD's (Contracts For Difference). These are illegal to trade in the US because of how dangerous it can be for the uneducated trader. In fact, CFD's are derivatives and derivatives happened to play a major role in the mortgage crisis. I decided to do a deeper dive into this situation and found out some interesting facts. Surprisingly and sadly, nobody is really talking about this because there are too many people making money by pushing the service for referral fees. The actual company name is "Tradenet Global UK Limited." You will notice the use of the name Tradenet and Tradenet Capital Markets on the website. This is probably designed as a smokescreen so its tougher for people to find any details on them. The current Director Meir Barak appears to be a flamboyant and charismatic salesman. He even reminds me of a Las Vegas magician, but its most likely your money that will do the disappearing act. Ive heard about far too many people blowing accounts because they close you out with a certain UNREALIZED loss (loss threshold depends on account size). And they act as if its a normal thing. "No big deal, I will just pay for another educational course." It feels very much like a casino. Its also possible that the model could be some sort of well hidden ponzi scheme where the culprits "rob Peter to pay Paul." I do want to stress that I cannot be 100% certain the business model is illegal or a ponzi as these schemes can often run a fine line between legal and illegal and can operate in grey areas. Also, there are many ways to go around things with legal loop holes that they may be exploiting. Multi level marketing companies such as Herbal Life are a great example. The issue is most clients could care less about the supposed educational package. They are only really joining to access the CFD buying power (monopoly money). Whether or not a company is a ponzi depends on what % of their revenues is coming from bringing in new members as opposed to an actual product or service. Often times ponzi's come in the form of investment companies, but there can be many different versions and people are getting more and more clever about ways to disguise them. The biggest ponzi in history was run by Bernie Madoff, who was at one time Chairman of Nasdaq. It went on for 20 years before being exposed. Regardless of whether or not the model is a ponzi scheme, below are 20 reasons I recommend you avoid Tradenet...
1. Balance sheet recently updated by Meir Barak for 2017 shows just $375 in the bank (Link at bottom of page and picture above). Doesn't necessarily mean they don't have other accounts offshore stashing cash from overpriced educational courses.
2. There have been 7 different directors in 8 years. 6 have resigned.
3. Colmex Pro is located in known fraud zone Cyprus off of the coast of Turkey in the Middle East.
4. Broker TEFS is also in a known fraud zone Mahe, Seychelles an island off of the coast of Somalia in Africa.
5. Accounts are shutdown with just an UNREALIZED loss. There is no reason to have such a ridiculous stipulation unless you are trying to aid accounts in blowing up in order to avoid payouts.
6. You are not allowed to enter or exit trades after hours.
7. Archive.org lets you view older versions of websites. This shows Tradenet may actually be owned by Colmex Pro. If true, then its possible the model could actually be illegal. Tradenet is registered in UK currently, but was registered under the same address as Colmex Pro at one point.
8. There may be one or more recent lawsuits filed against them.
9. Meir Barak is listed as a director at Colmex Pro.
10. The educational packages are outrageously priced and people are really only paying for the CFD buying power.
11. They push promotion hard through affiliates and pay out referral fees.
12. Tradenet in the UK was incorporated in just 2010 despite claims it was 2004.
13. You could end up having issues with the IRS.
14. On top of high priced educational packages, they take a piece of your gains if you win, and also charge commissions. Promoters claiming they are winning conveniently forget to mention this.
15. If the company goes under, the money paid for overpriced educational packages is gone and so is buying power. In which case you could not make back the money you paid for the course. There is no protection from FINRA or SIPC if things go south.
16. There have been changes lately that could be suspicious such as not allowing many small caps, spread issues, and people claiming they have been switched from CFD's to equities without notice.
17. Most everyone I have come across with Shadenet has blown one or more accounts.
18. Meir Barak has only been Director for one year according to filings.
19. One of the supposed gurus Scott Malatesta was a zone manager at GMC.
20. Too much leverage can crush you (especially newbies).
There are probably many more red flags than the ones posted above, but this list raises some serious concern. There of course will be people who argue that Tradenet is great, the guys are legit, and they payout. These are the ones getting paid to promote it! The problem with ponzi schemes is that they have to payout for a while or the scheme crashes. So it can be very misleading to claim that some payouts legitimize the service. The best fraudsters are going to be smart and most genuine appearing. They have to build up trust first by actually paying out. All you need to do is watch a few episodes of American Greed to understand this. Victims always say things like "he was such a nice guy and I trusted him completely." Its up to you to do your due diligence, be smart, and use some common sense. Don't get sucked into the baloney hype that everybody seems to be selling. Both of the island locations of Colmex Pro and TEFS in known fraud havens alone are reason enough to keep me away. TEF Securities is actually located in the same area where Somali pirates kidnapped Captain Phillips who was then rescued by Seal Team Six. There was even a blockbuster movie about this with Tom Hanks. Come on now! Of course I wrote this article not to try and hurt anyone, but to save as many people as possible from being harmed by this company. Always remember that if something seems too good to be true, it almost always is. The worst thing that could happen is you spend time and stress building an account and then after requesting payout, it never comes because the company has gone under. Another concern about ponzi schemes is they tend to crash during a market downturn when many start to request payouts at the same time. This is what happened with the Bernie Madoff situation. In every single ponzi (and there are many) the culprits start out by paying the victims in the beginning. Another important thing to consider is that those people promoting this service by showing supposed "P&L's" (glorified excel sheets usually) are technically trading without emotion because its not their cash. Its like they are trading with a demo account so the results can be very misleading. But, many of them are not posting the fact that they blew at least one or more accounts. I've also noticed that several younger traders are promoting "Shadenet." And just be to be sure everyone knows, that is a huge red flag. If some 20 year old kid is claiming to be an experienced and successful trading guru, there is a 98% chance its baloney. Especially if the kid talks like a hooligan, wears backwards hats, promotes endlessly on social media, or curses relentlessly in his videos. They aren't making money trading, but through promoting these suspect services. The circus clown acts are widespread and its time for people to wake up! What are the chances these kids started at 15 years old and know what they are doing? Extremely low. Most kids this age are playing Xbox, chasing girls, and going to Justin Bieber concerts. Be smart and use some sense my friends! There is a sucker born every day and please don't let that be you. That's it, I'm done. Please email me if you have any further questions. Tread carefully, good luck to everyone, and I wish you all the best!