The U.S. Commodity Futures Trading Commission (CFTC) obtained a Consent Order against Defendants IB Capital FX, LLC and its principals Michel Geurkink, and Emad Echadi, requiring them to pay, jointly and severally, $35 million in restitution to defrauded customers and a $420,000 civil monetary penalty for soliciting and accepting at least $50 million from approximately 1,850 customers in the United States and worldwide for off-exchange margined retail foreign currency trading, without being registered with the CFTC as is required.
We had reported about the CFTC’s initial action against IB Capital FX exactly one year ago.
The Order, entered by Judge Lee Yeakel of the U.S. District Court for the Western District of Texas, also imposes permanent trading and registration bans on them.
According to the Order, IB Capital is a New Zealand company, and Geurkink and Echadi are citizens of the Netherlands.
Geurkink and Echadi are being criminally prosecuted in the Netherlands by the Dutch Public Prosecutor’s Office for alleged fraudulent activities arising from the operations of IB Capital.
According to the Order, during the relevant period (from at least January 1, 2012 through September 18, 2012), the Defendants returned to customers – in the form of redemptions, refunds, and other payments – a portion of the approximately $51.6 million they received from approximately 1,850 customers, leaving the Defendants with a gain of $35 million, which was the gain received in connection with their failure to register as required under the CEA.
The Court’s Order arises from a CFTC enforcement action filed against the Defendants on November 9, 2015 (see CFTC Complaint and Press Release 7277-15, November 16, 2015). The CFTC Complaint alleged that, during the relevant period, the Defendants engaged in the offering of agreements, contracts or transactions in forex to retail customers who were not eligible contract participants without being registered as required by the relevant provisions in the CEA and the CFTC Regulations. In fact, the Defendants have never been registered as required with the CFTC. Courts have long recognized that the operation of an unregistered entity is a serious violation of the CEA and CFTC Regulations and is a threat to the integrity of the industry.
The CFTC appreciates the assistance of the Ministry of Security and Justice in the Kingdom of the Netherlands (particularly the Dutch Public Prosecutor’s Office and Fiscal Police (FIOD)), the Australian Securities & Investments Commission, the U.K. Financial Conduct Authority, the Hungarian Financial Supervisory Authority (which merged with the Central Bank of Hungary (Magyar Nemzeti Bank)), the Financial Markets Authority of New Zealand, and the New Zealand Serious Fraud Office.
The CFTC cautions that Orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.