The U.S. Commodity Futures Trading Commission (CFTC) announced that it simultaneously filed 10 enforcement actions in Federal District Courts in Illinois, New York, Utah, and Wyoming, alleging that 11 entities are illegally soliciting members of the public to engage in foreign currency (forex) transactions and are operating without being registered with the CFTC. These cases follow on the CFTC’s January 26, 2011 filings against 14 other entities for similar violations (see CFTC Press Release 5974-11).
According to CFTC Director of Enforcement David Meister: “These actions reflect the CFTC’s continued resolve to make the forex market safer for investors by strictly enforcing the CFTC’s new forex regulations, which became effective in October 2010. These new regulations require entities that wish to participate in the forex market to register with the CFTC and abide by regulations that are intended to protect the public from potentially fraudulent operations.”
The following companies were sued by the CFTC as part of this sweep:
1st Investment Management, LLC, a Wyoming LLC;
City Credit Capital, (UK) Ltd., a United Kingdom company;
Enfinium Pty Ltd., an Australian company;
GBFX, LLC, a New York LLC;
Gold & Bennett, LLC, a New York LLC;
InterForex, Inc., a British Virgin Islands company;
Lucid Financial, Inc., a Utah corporation;
MF Financial, Ltd., a Belize company with offices in New York City;
O.C.M. Online Capital Markets Limited, a British Virgin Islands company
Trading Point of Financial Instruments Ltd. a Cyprus company; and
Windsor Brokers, Ltd., a Cyprus company.
In the forex market, Retail Foreign Exchange Dealers (RFEDs) and Futures Commission Merchants (FCMs) act as the counter-party to their customers’ purchase and sale of forex. Under the Commodity Exchange Act (CEA) and CFTC Regulations, an entity acting as an RFED or FCM must register with the CFTC. Further, with a few exceptions, such an entity also must be registered with the CFTC if it solicits or accepts orders from U.S. investors in connection with forex transactions conducted at an RFED or FCM.
In all but two of the complaints, the CFTC alleges that a defendant acted as an RFED; that is it offered to take or took the opposite side of a customer’s forex transaction, without being registered. In the remaining two complaints against GBFX, LLC/Gold & Bennett, LLC and Lucid Financial, Inc., the CFTC alleges that the defendant solicited customers to place forex trades at an RFED without being registered as an Introducing Broker. Further, in every complaint, the CFTC alleges that the defendant solicited or accepted orders from U.S. investors to enter into forex transactions in violation of the CEA.
The CFTC is seeking preliminary injunctions to prevent these defendants from operating as alleged unless and until they comply with the CEA and CFTC Regulations. The CFTC’s complaints also seek civil monetary penalties, trading and registration bans, disgorgement, and rescission.
With respect to the similar actions filed in January 2011, 11 of the14 defendants have either settled the charges or defaulted, and the charges against the remaining three are pending.
The CFTC strongly urges the public to check whether a company is registered before investing funds. If a company is not registered, an investor should be wary of providing funds to that company.
A company’s registration status can be found at: http://www.nfa.futures.org/basicnet/welcome.aspx
The CFTC also strongly urges members of the public to visit the below websites before investing money in the forex market:
CFTC Consumer Advisory: Forex Fraud: If it sounds too good to be true, it probably is!
http://www.cftc.gov/enf/enf-forex.htm
Fraud Advisory from the CFTC: Foreign Currency Trading (Forex) Fraudhttp://www.cftc.gov/ConsumerProtection/FraudAwarenessPrevention/CFTCFraudAdvisories/fraudadv_forex.html
Fraud Advisory from the CFTC: Foreign Currency Trading (Forex) Fraud
Foreign Exchange Currency Fraud: CFTC/NASAA Investor Alert
The CFTC Division of Enforcement staff members responsible for these cases are Kathleen Banar, JonMarc Buffa, David Chu, Jennifer Diamond, John Einstman, Rick Glaser, Ava Gould, Amanda Harding, Rosemary Hollinger, Paul Hayeck, Tara Kelly, Joe Konizeski, Jon Kramer, Randolph Lam, Judith McCorkle, Joy McCormack, Susan Padove, Joseph Rosenberg, Jennifer Smiley, Mary Beth Spear, Elizabeth Streit, David Terrell, Richard Wagner, and Scott Williamson.
The CFTC appreciates the assistance of the United States Attorney’s Office for the District of Wyoming, the Utah Attorney General’s Office, the Utah Division of Securities and the United Kingdom’s Financial Services Authority.
