Forex Capital Markets (FXCM) is to pay USD843,000 to settle CFTC charges that it failed to diligently supervise its officers’, employees’, and agents’ handling of accounts held at FXCM in the name of a fraudulent foreign currency exchange pool, Revelation Forex Fund (RFF).
RFF was operated by Kevin G White (White) and two entities he controlled (the White Entities).
The CFTC sued White and the White Entities on 9 July, 2013, for their fraudulent scheme and subsequently entered into a Consent Order for permanent injunction against them. In a related criminal action, White was sentenced to over eight years of prison for mail fraud.
According to the CFTC’s Order, from 1 April, 2013 to 10 July, 2013, FXCM failed to follow its compliance procedures that require that it “know all of its customers” and that its employees identify and promptly report suspicious activities to appropriate authorities. Although FXCM was aware of warning signs that RFF was a fraud, FXCM failed to identify or report these warning signs in violation of its own compliance procedures, or that White’s operation of websites on behalf of the White Entities violated their exemption from registering as a commodity pool operator. The Order also finds that FXCM failed to respond fully to a CFTC document request and, in doing so, violated a previous Commission order.
The CFTC Order requires FXCM to pay a civil monetary penalty of USD700,000; disgorge commissions and fees of USD143,922.50 it earned from the RFF accounts; and comply with certain undertakings including hiring a third-party compliance consultant to review and report on the supervisory issues raised in the Order.
The CFTC Division of Enforcement staff members responsible for this case are Harry E Wedewer, Dmitriy Vilenskiy, John Einstman, and Paul G Hayeck.
