The Cypriot broker Freedom24 advertises fixed deposit interest rates of up to 8%. But savers should stay away from it.
For almost a decade, savers in Germany received at most a damp handshake from their bank for their money. Then, in the summer of 2022, things suddenly happened very quickly: the base interest rate climbed out of the zero-point-something range and with it the interest rates on current and fixed-term deposit accounts rose ever higher. Banks first offered 1%, a little later 2% interest on deposits, but now returns of 3% per year and more are normal. But some interest offers are still astonishing. For example, that of a Cypriot broker who is currently drumming up advertising in Germany: Freedom24 wants to pay its savings customers up to 6% interest per year on fixed-term deposits, and even more for deposits in USD. And you inevitably ask yourself: can this be legal?
5.98% interest on fixed deposits in euros
The fact that brokers pay interest would have been worth a headline in itself a few years ago. Now it is the most normal thing in the world. Many online brokers reward their deposit customers for transferring money to their clearing account. In principle, this is no riskier than depositing money with a traditional bank, after all, brokers also work with banks to keep their customers’ assets safe. For example, the neobroker Trade Republic recently announced that it would be paying 4% interest on deposits in the future. It is now only 3.75%, but the provider is currently leading the local comparisons.
At first glance, the offer from the broker Freedom24 reads very similarly. It promises up to 3.63% interest on deposits, which can be withdrawn at any time, similar to overnight money. On the other hand, money that is lent to the broker for up to a year is supposed to earn a full 5.98%, and even over 8% when invested in USD. How is that possible?
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Up to 3.63% on the “D-Account”
First of all, it is worth taking a closer look at the terms and conditions. Because how much interest you can actually get depends on the currency in which your savings are parked and the amount invested.
Freedom24 calls the savings account for daily available funds the “D-Account”. This is a type of fixed-interest sub-account that is automatically set up when you open a trading account with the broker, as the provider explains on its website. There is no minimum investment amount, but according to Freedom24, interest only starts to accrue on a balance of at least €150. Freedom24 says it pays 3.63% per year for daily available funds – provided the savings are invested in euros. For deposits in USD, the broker even promises 5.31%. In both cases, according to Freedom24, these are “dynamic interest rates”. The interest rate is linked to the reference interest rates “Secured Overnight Financing Rate” (SOFR) and “Euro Interbank Offered Rate” (EURIBOR). Both serve as a benchmark for many financial products. Because the reference interest rates fluctuate greatly, the interest on the balance at Freedom24 can change daily, as the broker itself admits.
Up to 8% for fixed deposits – but not for all
In principle, this also applies to fixed-term deposit interest rates, as these are also tied to market interest rates and fluctuate. However, in this case, the current interest rate is fixed at the beginning and remains in place until the end of the selected term (3, 6 or 12 months). In mid-June 2024, this is up to 8.76% per year for a deposit in USD and up to 5.98% in euros.
However, savers have to have a lot of money saved up to get such interest. The 5.98% or 8.76% is only available for an investment amount of at least €100,000. In addition, the money must be invested for a period of twelve months. For three months and six months, the interest rate is only 4.99% and 4.39% respectively. The minimum investment amount is €1,000, and there is no upper limit.
Interest on fixed deposits at Freedom24
| Duration | <100,000€ | >100,000€ | <100,000 USD | >100,000 USD |
| 3 months | 3.99% | 4.39% | 5.84% | 6.43% |
| 6 months | 4.53% | 4.99% | 6.64% | 7.3% |
| 12 months | 5.44% | 5.98% | 7.97% | 8.76% |
Minimum investments or not: Freedom24 outshines all of its competitors on the European fixed-term deposit market. In Germany, for example, VW Bank offers the highest returns for 6-month fixed-term deposits at 3.45%, while Estonian Bigbank offers 3.6% and French direct bank Stellantis offers 3.5%. The question remains whether the Cypriot broker’s offer should be trusted.
Who is behind Freedom24
Who is actually behind the broker that sounds like financial freedom? Freedom24 is a brand of Freedom Finance Europe Ltd., an online broker based in the Cypriot city of Limassol, more precisely on the fifth floor of the Freedom Tower. The European Freedom Finance Europe Ltd. is in turn a subsidiary of Freedom Holding Corp., an American investment company whose shares have been traded on the Nasdaq for several years.
No BaFin regulation
Based in Cyprus, the broker is regulated by the Cyprus Securities and Exchange Commission (CySEC), the Cypriot financial supervisory authority. The American holding company is regulated by the American stock exchange regulator SEC. Freedom Finance, on the other hand, is only registered with the German BaFin, but is neither monitored nor regulated by it.
Even if some advertisements claim otherwise: The broker is “regulated by the Cyprus Securities and Exchange Commission and is subject to supervision by BaFin and the US SEC,” says an advertisement in a business magazine, while another states: “Freedom24 is regulated both in the USA and in Europe – in this case by CySEC through the location of the European parent company and by BaFin. The German financial regulator is responsible for the Berlin branch.” The Freedom Finance group does indeed operate a location on Berlin’s Kurfürstendamm, but this is merely an agent for the European broker based in Cyprus.
“Financial institutions based in Cyprus are not monitored by the German financial regulator BaFin,” warns Niels Nauhauser, investment expert at the Baden-Württemberg Consumer Advice Center. “If disruptions occur, affected consumers cannot turn to the German financial regulator or the local ombudsman’s offices.” Nauhauser categorically advises against opening accounts with Cypriot institutions.
Freedom24, for its part, emphasizes its own seriousness as often as possible. The website features slogans such as “Trust is good, regulation is better.” A “positive S&P rating of B/B” underlines the “financial stability,” says the broker’s website. Freedom24 also meets “the strict requirements of MiFID II.” That may be true, but customers from Germany still risk high losses as soon as they lend their money to the broker.
Maximum of €20,000 protected in case of bankruptcy
The maximum amount insured in the event of bankruptcy is €20,000, the company explains on its website. This means that balances above this limit can be lost in the event of bankruptcy. As a reminder: in Germany, deposits in call money or fixed-term accounts of up to €100,000 are protected from access by the insolvency administrator, which corresponds to the European standard. However, the classic deposit protection for bank deposits in the EU does not apply in the case of Freedom24.
“Such high interest rates always have a catch”
“Banks based in Cyprus,” says Nauhauser from the consumer advice center, “cannot offer higher interest rates than banks elsewhere.” The profits are therefore not made in Cyprus, but on the global capital markets. “Interest rates as high as 5.98% here (from €100,000) always have a catch,” warns Nauhauser, in this case it is the lack of deposit protection. You can also “buy junk bonds directly, although these have another major advantage: they are listed on the stock exchange, which at least guarantees to a certain extent that the interest rate corresponds to the associated risk.”
Money flows into OTC transactions
It is not without reason that terms such as “call money account” or “fixed-term deposit account” are avoided on the Freedom24 website. “The money invested is invested in OTC swap transactions, which means it is not considered a classic fixed-term deposit or call money,” explains the broker in the text of an advertisement. More detailed information on this cannot be found immediately. In other words: it is exposed to risk.
7€ fees per withdrawal
Some losses are guaranteed from the start with an account with Freedom24. The broker charges its customers hefty fees. For example, Freedom24 charges a whopping €7 in fees for every withdrawal from a deposit to a bank account. If you believe the reviews on the Trustpilot rating portal, Freedom24 not only costs its customers fees, but also nerves. There are a few dozen one-star reviews on the Trustpilot rating portal. Some complain about deposits that never arrived, others about blocked accounts, and still others about support requests that came to nothing. “Totally confusing,” complains one user, another complains about the “complicated app, no one can understand it.” “Lots of bling bling and nothing behind it,” says a third, and advises: “Stay away from this broker.”