Shipkevich Bitcoin and ICO Attorney
Felix Shipkevich December 5, 2012

The U.S. Commodity Futures Trading Commission (CFTC) has issued a report stating that Judge Katherine Forest of the U.S. District Court for the Southern District of New York has ordered Forex Group, Forex Partners, and Highland Stone to pay more than $1.8 million in penalties and ill-gotten gains.

The order also imposes permanent trading and registration bans against the defendants and prohibits them from violating the Commodity Exchange Act as well as any CFTC regulations.

According to the report, the case stems from a CFTC anti-fraud enforcement action against the firms, which are accused of “fraudulently solicited 106 customers who invested more than $2.8 million to trade retail foreign currency (forex).”

The CFTC’s statement reads:

“In soliciting customers, the defendants falsely claimed, on their websites and elsewhere, that their forex trading for customers was profitable for a period of several years, the order finds.  The defendants’ claims included a falsely reported customer gain of 51.94 percent in 2010, a year, in fact, in which their customers lost more than $1.2 million. Overall, customers lost more than 93 percent of their total invested principal through the defendants’ forex trading, the order finds.”

The judge’s order also found that the defendants “distributed false account statements to prospective customers. The account statements presumably showed trading profits and suggested that the firms were in compliance with certain CFTC rules and regulations.

CFTC Enforcement Blitz

The CFTC seems to be increasing the rate of its enforcement of financial regulation. The agency issued four new enforcement actions in a single week (last week), against Eagle Market Makers, Cantor Fitzgerald, Harbor Light, and most prominently, Intrade.

The wave of enforcement actions began on Nov. 20 with Eagle Market Makers Inc., a registered Futures Commission Merchant (FCM), Commodity Pool Operator (CPO), and Commodity Trading Advisor (CTA) based in Chicago, Illinois. Eagle is ordered to pay $223,000 for exceeding spot-month position limits in corn futures and for “failing to diligently supervise its traders,” the CFTC said.