The National Futures Association (NFA) has today filed a complaint against North American introducing broker FX Evolve LLC which relates to the company’s practices regarding managed FX accounts.
The NFA’s complaint alleges that as of February 2014, FX Evolve had 100 active accounts, all of which exclusively traded FX. FX Evolve introduced its customers’accounts to severa! NFA Member firms and their foreign affiliates, including lnstitutional Liquidity LLC (lLQ), a former FCM and RFED Member of NFA.
The complaint goes on to consider that three of FX Evolve’s customer accounts – Wilma Minger, Linda Felber (Felber), and DAS Funding Group LLC (DAS Funding Group), which was a Nevada LLC owned by Dominic Schender, had the highest trading volume of any of ILQ’s accounts. Wilma Minger also appeared to have an interest in another account at lle in the name of TFG FX LLC (TFG), which was also introduced by FX Evolve. TFG was an incorporated company of which Wilma Minger and individuals named Craig Linch and Stephen Kirkland (Kirkland) were managing members.
Kirkland was named in a 2013 Securities and Exchange commission (SEC) enforcement action in which he was charged with making false and misleading statements to investors.
Wilma Minger’s son, Steve Minger, was the contact for the TFG account. In 2005, steve Minger pleaded guilty to bank fraud, conspiracy and income tax evasion. Further, Steve Minger owned a company in Florida that had the exact name as DAS Funding Group, the Nevada company which had an account introduced by FX Evolve to lLQ.
Hoerr was aware of the criminal case against Steve Minger, knew that Steve Minger had pled guilty to engaging in criminal activity, and that Steve Minger went to jail. Hoerr claimed to be unaware of the SEC case against Kirkland, although Hoerr admittedly knew Kirkland very well.
The accounts of Wilma Minger, Felber, and DAS Funding Group all purportedly traded using a third-party trading system called the “Turbo” trading system. According to Hoerr, FX Evolve did not solicit for the Turbo trading system. lnstead, it was the decision of Wilma Minger, Felber, and DAS Funding Group to use the Turbo trading system to trade their accounts. They also asked to trade their accounts using ILQ’s multi-account manager structure, which allowed their trades to be placed in a master account and then atlocated to their individual accounts.
Documents maintained by FX Evolve indicated that Tri-Coastal Technology Partners, lnc. (Tri-coastal) was the developer of the Turbo trading system. According to Hoerr, Tri-coastal was operated by Albert Collins (Collins), a Director of Tri-Coastal and a personal friend of Kirkland. Although Tri-Coastal was incorporated in the Caribbean island of Nevis, Hoerr said that the firm was located in the United Kingdom (UK).
Hoerr provided NFA with an e-mail from Collins of Tri-Coastal in which Collins represented that all of the Turbo trading signals were sent by him from the UK.
The NFA asserts that the trading signals did not agree with the trades placed in the master account at ILQ. Based on these circumstances, it appears that Kirkland and/or Steve Minger placed trades for the accounts of Wilma Minger, Felber and DAS Funding Group without being registered, having any financial interest in those accounts, or having authority – through a Power of Attorney, a Letter of Direction, or any other form – to place trades for wilma Minger, Felber, and DAS Funding Group. This situation was facilitated by FX Evolve and Hoerr who provided Kirkland and Steve Minger – who Hoerr knew had a prior criminal fraud conviction – with log-in information for the ILQ master account, thus enabling them to place trades in that
As an addendum to the initial complaint, the NFA alleges that FX Evolve did business with GNS Capital (GNS) and Alpha Equities and Futures, Ltd. (AEF), which were required to be registered as lBs and NFA Member forex firms, but were not registered as such. Specifically, FX Evolve entered into “Marketing Agreements” with these entities, whose primary business was providing educational services, wherein GNS and AEF solicited U.S.
customers for FX Evolve and, in return, they received a portion of the revenues generated by these customers. During a ten-month period, the NFA alleges that FX Evolve paid GNS and AEF almost $50,000 in forex rebates for customers that GNS and AEF had referred to FX Evolve. Hoerr admitted that he eventually learned that FX Evolve’s arrangements with GNS and AEF did not comply with NFA rures and, as a result, FX Evolve required personnel at GNS and AEF to register as branch office managers of FX Evolve. However, for approximately a year prior to taking this corrective action, FX Evolve allowed GNS and AEF to act as de facto IBs by accepting customer referrals from them and paying them compensation for such referrals.
FX Evolve adopted an AML program that listed several red flags for which the firm should be on the alert when opening and monitoring accounts. One such red flag was: “The customer (or person publically associated with the customer) has a questionable background or is the subject of news reports indicating possible criminal, civil, or regulatory violations.”
The NFA has published that a maximum fine of $250,000 could be applied if the complaint is upheld.
To read the complete case document from the NFA, click here.