January 12, 2020 | AtoZ Markets – European users of the social trading platform eToro feel they have been rudely pushed out of margin positions in cryptocurrencies amid high market volatility. The Wall Street Journal reported this on January 12.
As a reminder, retail investors in the US and UK are not allowed to buy crypto derivatives, including leveraged financial contracts, where traders only need to deposit a fraction of the contract value.
eToro European clients outraged over crypto CFDs closure
EToro clients in European countries, where CFD trading is still allowed, received an email on Friday January 8, demanding that the margin be increased to 100%, otherwise, all positions will be closed on the evening of the same day.
Clients needed to increase their position to avoid liquidation. If there was not enough money on the account, they were offered to close other positions in order to free up capital.
Angry users later tweeted that 4 hours after the notification, social broker eToro closed all margin positions, including those that traders were trying to save.
“EToro has violated a client agreement,” said Slavko Vesenyak, a Slovenian lawyer representing several of the broker's clients in Europe. "The notice was sent four hours before the positions were closed, so clients in other time zones learned about it when their positions were already liquidated."
According to Amy Butler, director of PR at eToro, the changes have not affected a significant portion of the company's customers.
“We understand that dozens of customers are unhappy and we are doing everything we can to eliminate the root cause of their dissatisfaction,” she said.
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Traders want eToro CySEC license revoked
In addition, eToro raised its deposit requirements from $200 to $1,000 last week to cope with the surge in demand from traders looking to capitalize on rising prices.
“The eToro clients will get their funds. If eToro does not refund them, the Cyprus state will,” said Yuri Toplyak, a PhD student at Fordham University Law School.
Toplyak confirmed that the clients of eToro, whose interests he represents, are ready to apply to the Cyprus Securities and Exchange Commission (CySEC) with a demand to revoke the broker's license.
See also: FCA Removes Permissions of 3 Cyprus Firms to Sell CFDs
“I think cryptocurrencies grew too fast and eToro realized that they didn’t have enough money to pay out profits to customers,” Toplyak said in an interview. "So they just liquidated positions."
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