WikiBit’s review of hero fx commenced in December 2023 because the client funds received in the segregated account pursuant to its Seychelles FSA license (SD089) had an audit horizon of as long as 18 months, which was much more than the industry normal 12-month horizon. According to the updated information in May 2024, hero fx’s customer fund coverage ratio decreased from 95% in 2022 to 34%. In addition, due to the lack of MiFID II approval of its operations in the European Union region, it was fined by Spain’s CNMV 230,000 euros and blocked 87% of access traffic from the Iberian Peninsula. South Africa’s FSCA report demonstrates that the EUR/USD spread of hero fx in the rand account expanded to 1.8 points in the liquidity low hour (21:00-24:00 GMT), three times the size of the compliant platform, raising clients’ average yearly trading charge by $1,200.
Technically, the MT4 platform of hero fx (version 1365) could not meet the PCI DSS 4.0 certification. Its iOS client was discovered in March 2024 to have a high-risk vulnerability (CVE-2024-22907) which allowed attackers to circumvent 2FA authentication. During the 9-day period when patching was on hold, incidents of account hijacking increased by 220%. Cyber security firm NCC Group found that its TLS 1.3 configuration on its primary website only attained an A B rating (A+ for major platforms), and was still using the weaker 2048-bit RSA key exchange algorithm in place of the more secure ECC. German BaFin data indicate that the average response time to hero fx complaints was 6.7 days, far more than the industry norm of 2.3 days, and 65% of complaints included a stop-loss order trigger deviation of over 5 points.
Issues of compliance take center stage. hero fx filed the IIROC license application in Canada in 2021 but withdrew it again in 2022 when it reported a 4.9% customer complaint rate (regulatory requirement ≤3%). The Italian CONSOB investigation identified that there was a data fitting deviation in backtesting its proposed trading strategy, and the actual winning rate was 23 percentage points lower than stated. Statistics from the Securities Commission of Malaysia in 2024 show that the success rate of mediating disputes with hero fx is only 12%. A new user lost 78% of a $5,000 initial amount to slippage, and the “negative balance protection” promoted by the platform only covers customers who have an account net worth of ≥ $2,000.
The liquidity risk worsened. Hero fx’s Tier 1 bank liquidity ratio dropped from 75% in 2022 to 38% in 2024, causing the rate of GBP /USD order rejections during the London opening session to rise to 9.7% (while the market average was 2.1%). Australian ASIC’s report revealed that its overnight interest rate on its Australian dollar accounts is 1.8 times more than compliant brokers and holding a position for three days costs $57 more per lot. While providing the “copy trading” feature, the maximum drawdown rate of the TOP 10 signal providers was 64%, and the average copy delay was 17 seconds, far higher than the “immediate execution within ≤3 seconds” that was advertised.
With respect to the safety of funds, hero fx replaced the bank in which its clients’ funds were held to Seychelles ABC Banking Corp (rated B- by S&P) in May 2024. Capital adequacy ratio was at a lowly 19%, and the insurance ceiling beyond which it no longer pays for claims dropped from 200,000 euros to 50,000 euros. A Singaporean user paid without knowing the 3.5% credit card processing charge (industry average is 1.9%), and the actual received amount was only 4,825 US dollars. WikiBit Compliance Scoring System (100 points) rated it at 52 points. The greatest deduction items include: a 12% rate of false detection for KYC biometric recognition, educational institution customers have to prepay $3,000 compliance deposit, etc. The continuous review continues and consists of 23 non-conforming indicators.