Is TradeZero a Scam? Is TradeZero Safe and Legitimate Broker? Is TradeZero Account Free and Insured?

Is TradeZero a Scam?

If you are considering opening a brokerage account on TradeZero you may be wondering if the site is legitimate or if it could potentially be a scam. We have done some research to help you make an informed decision on whether TradeZero is safe for you and if you should open a brokerage account there.

Ownership of TradeZero

TradeZero has different sites for those in the United States and those outside of the country. In the United States, TradeZero America is a corporation established in the state of Delaware. It operates with a business address in Brooklyn, New York, and it’s current Chief Executive Officer (CEO) is Michael Haupt. The TradeZero America site was established in 2019, and came after the TradeZero Bahamas operation.

TradeZero Bahamas was founded in 2015 by Dan Pipitone and John Muscatella. Both co-founders have extensive backgrounds in the technology and trading industries. The company is headquarted at an address in Nassau, Bahamas. While the operation is based in the Bahamas, local citizens as well as US citizens and residents of Ontario (Canada) are not eligible for TradeZero Bahamas accounts.

Insurance

TradeZero America is a broker dealer and a member of both the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). Since they are a member of SIPC, this means that account holders are insured up to $500,000 in coverage for cash and securities that are held by TradeZero America; keep in mind cash coverage is limited to $250,000 only. This is really settling for American customers, as it provides great peace of mind, similar to an FDIC insured bank account would. It appears that at the time of writing, there is no additional insurance offered for high value accounts that exceed $500,000. While the insurance in-place is great for those that have it, this insurance unfortunately does not apply at all to users of TradeZero Bahamas.

TradeZero Bahamas is registered with the Securities Commission of the Bahamas as Trade Zero Inc. For customers of TradeZero Bahamas, there is some insurance provided. According to their website, they provide insurance of up to $250,000 per account through Lloyds of London, a well-known global insurance company. However, it would be advisable that you do some more research on the insurance policy in-place, as sometimes there can be fine print or exceptions that you should be aware of before putting your money at risk. It appears that at the time of writing, there is no additional insurance offered for high value accounts.

Better Business Bureau

At the time of writing, it appears that both TradeZero America and Trade Zero (Bahamas) have no records posted on the Better Business Bureau database. While this is positive in that there are no complaints filed against the company, it may be concerning that there is no corporate information listed at all.

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Clearing House

TradeZero America has partnered with Apex Clearing, a United States based business, to act as the clearing firm for trades. Apex is a FINRA and SIPC member that is based in Dallas, Texas, and has been around since 2012.

TradeZero (Bahamas) has partnered with Vision Financial Markets, a United States based business, to act as the clearing firm for trades on its site. The company is based in Stamford, Connecticut and is registered with both FINRA and the Securities and Exchange Commission (SEC).

The fact that both TradeZero entities utilize legitimate and known clearing firms that are based in the United States and therefore are regulated by US regulators, is a positive indication that TradeZero is likely operating a fully legitimate business and not a scam. It is also a positive indication that both websites list their clearing firm on their Frequently Asked Questions section.

TradeZero Legitimacy

Overall, viewing the information we have, it would appear that both TradeZero America and Trade Zero (Bahamas) are likely not scams.

While they both have certain risks associated with them, as does any investment, these should be analyzed and measured. It should provide some level of comfort that both entities are registered with their local governments as brokers of securities and that both maintain offices in their local country. This would be a red flag if they were to have an overseas address only.

While the fact that the firms are regulated is not fool proof, it at least shows that they are forced to comply with government regulations or face penalties, fines, or even risk losing their license and therefore their ability to operate as a company.

Also, if you search online you will be able to find a wealth of information from actual TradeZero users that can tell you a bit about what it is like to trade on the platform. While it may not necessarily be the best platform for you, it is more likely than not a legitimate business operation and not some kind of scam looking to steal your money.