Beware! NorthState is an offshore broker! Your investment may be at risk.
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NorthState is an offshore broker that offers trading in Forex, commodities, shares, indices, and cryptos. They advertise four different types of accounts depending on the minimum deposit required and the trading conditions associated.
The registration form asked for First and Last names, Address, Phone number, Email address, and a choice of Account currency – EUR or USD. After supplying all required information, we were taken to the client area without any confirmation being displayed. We did not receive a confirmation email also, which is quite unprofessional and a sign that the website may be only after your personal data.
Unlike their website, which we have to admit impresses with good design, the client area is quite bleak. There are few functionalities and one of the images in the payment methods logos section is missing.
NorthState regulation & safety of funds
NorthState’s website claims to be owned and operated by Long Creek Partners LTD with Registration Number: 2020/IBC00036 with an address in the Commonwealth of Dominica. This Caribbean country is an offshore zone and the laws there do not provide a regulatory framework for Forex trading and/or other Forex related services. We also checked Dominica’s regulatory authority, the Financial Services Unit’s website but did not find the company’s name among the licenced Dominica-registered financial services providers listed there.
From this, we can safely conclude that NorthState is not a licensed and regulated broker, and does not have to comply with any laws, statutory rules or orders, code of conduct, licensing provisions or consumer/investor protection schemes. Unlike such offshore jurisdictions, established financial hubs have regulatory agencies, for example the FCA in the UK and CySEC in the EU, which impose strict rules and guidelines concerning Forex trading. Among these are Minimum Capital Requirements (€730 000) in order to prove their good financial standing, Client Account Segregation (clients’ money is kept separate from the broker’s operating funds) and Compensation Schemes providing additional guarantee to clients’ funds up to a certain amount (85,000 GBP in the UK and 20,000 EUR in the EU). In the case of NorthState, however, any claims of “Strong protection of your funds” should be taken with a healthy dose of mistrust.
NorthState Trading Software
There is no trading platform advertised on the broker’s website, but in the client area there are links to download the MetaTrader4 (MT4) software as a dektop application and to login in a web-based platform, Webtrader. MT4 is one of the most functional and powerful trading platforms on the market, favoured by more than 80% of users around the world. It features an intuitive, user-friendly interface, advanced charting and analysis tools, as well as copy- and auto-trading options, and offers a large number of instruments from various asset classes with different settings, all tradable from the same interface and the same trading account.
The Webtrader platform, on the other hand, looks quite poor in terms of design and functionality. It does not have any of the tools and features that established platforms do.
NorthState Trading Conditions
Despite the advertised narrow spreads that we see in the accounts section, from 0.3 to 2.3, what we found on the MT4 platform after we logged in was a spread of 4 pips for the EURUSD currency pair. Actually, a spread of 0.3 pips is too good to believe. Even the most reputable brokerages rarely offer spreads of less than 1 pip, and if they do it is usually to traders with established history and large trading volumes. A spread of 4 pips is extremely high – It guarantees huge profits for the broker, but is not beneficial to the traders. Regulated brokers do not offer spreads larger than 2 pips for this most traded currency pair.
The leverage NorthState offers for its Junior account is 1:600. Although it is not very high, brokers licensed in the US have a leverage cap of 1:50 for non-professional traders, and the one in the UK and EU is even lower – 1:30. High leverage is not something negative in itself, and there are actually regulated markets, such as Australia, which do not impose leverage caps. It can be quite risky, however, because although one can make profits with leveraged trading, he/she can also lose quite a lot, sometimes even more than initially invested.
NorthState Deposit/Withdrawal Methods And Fees
As we noticed in the client area, NorthState presents the logos of major credit cards and also advertises bank transfer as a payment method. The minimum deposit amout is $/€ 250 and they use outside providers for processing. Popular methods, such as PayPal and other preferred by traders e-wallets, eg. Skrill and Neteller, however, are not supported.
There are no Deposit fees declared in the Legal section of the Site. There is a vague statement that if you use alternative payment methods, additional fees and restrictions may apply. Of course, there is no definition what these alternative methods are.
With regards to withdrawals we read that the typical processing time is up to 5 business days, but “it might take longer for withdrawals to bank accounts due to the additional security procedures in force.” Regulated brokers usually execute withdrawal requests within 24 hours and charge a flat fee of about $20-$25. Here we see that this brokerage charges $/€/£ 50 for wire transfer, $/€/£ 25 for credit cards plus a processing fee of $10.00 /€7.00 /£5.00, and $/€/£ 25 for ePayments. There is an additional 10% charge if the account has not executed more than 200 in turnover and/or from accounts that have not been verified.
There’s also the Dormant Account fee – if you did not login and traded from your account within six (6) months your account will be subject to a deduction of 10 % each month. Six months is standard for this, but the fee regulated brokers charge is rarely more than $20.
Considering these excessive fees and the lack of regulation by a respected watchdog agency, we have enough reasons to be suspicious that the website is involved in foul play and we recommend to our readers not to risk investing with this broker.
How does the scam work?
Here we will outline the most common scamming scenario. The first step is to capture the users’ attention with ads promising fast money. When they click on such an ad, they are redirected to a website that would ask to provide email address and phone number. This personal information is then used by the scam brokers who will start calling and asking to invest with them. The initial deposit is usually around $250 from which these brokers will make a fat commission.
After that, users are transferred to senior brokers. These are expert con-artists who will sweet-talk them into putting even more money. When the traders decide to get out, however, it turns out it is not that simple. The scammers will talk them into postponing their withdrawals or will draw out various reasons to deny the request. All of this is with the objective to miss the limited time period for filing a chargeback with their bank and get their money back.
We should note that VISA and MasterCard have recently taken measures to combat online scams and are classifying all forex transactions as high risk. Furthermore, they have increased the period for filing a chargeback from 6 months to 540 days.
What to do when scammed?
In the event you become a victim of such a scam there are some things you should know. If you used a major credit card to fund the account you should immediately file for a chargeback with your bank or credit card provider. In case you supplied sensitive financial information to the scammers, such as account details and passwords, you should cancel your credit card or change your pass.
If you used bitcoin or bank wire, however, chances of recovering your funds are slim. Do not get hooked by any “recovery agents”, who prey on scam victims, using their hopes of retrieving their money. These are just another type of scammers who will ask you for an upfront fee in order to get your money back, but once you pay them, you will not hear from them again.
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