Daily fraud update: 10th June

CFTC tells British forex firm to pay up

A US regulator has engaged in a transatlantic battle with a British forex firm over allegations of fraud.

The Commodity Futures Trading Commission (CFTC) has gone after Gain Capital UK Limited, which, it claims, did not gain the appropriate registration as a retail foreign exchange dealer.

Now, the CFTC has “issued an order filing and settling charges” – and it has hit Gain UK with a sum of almost half a million dollars to repay.

In a press statement, the regulator told the story of what it alleges Gain UK did.

It claimed that the firm operated from 2014 to 2019 – and potentially longer.

It also explained the nature of the transatlantic link, and how Gain UK supposedly worked as a “counterparty” to American forex customers.

“The order finds that from at least February 6, 2014 to March 8, 2019, Gain UK acted as a counterparty to retail foreign exchange (forex) customers who were located in the United States, without registering as an RFED as required by the CEA and CFTC regulations,” it said.

“Gain UK accepted customers who used U.S. mailing addresses in account applications and provided documents such as lease agreements, utility bills, and health-insurance enrollment letters suggesting that they were located in the United States.”

It also shared a story of a specific customer who, it claims, explicitly told Gain UK that she was based in the US.

Gain UK, the regulator claims, then still failed to sign up to the relevant regulatory framework.

“Furthermore, one customer informed a Gain UK employee that she was a student at a U.S. university when questioned about her account application and U.S. mailing address,” it said.

“Nevertheless, Gain UK failed to register as an RFED as required,” it added.

In a further claim, the regulator also claims that Gain UK did not properly oversee the management of a customer’s account.

It says that there is evidence that the firm did not properly notice the work of an unregistered commodity trading advisor associated with its platform.

“Specifically, Gain UK failed to detect warning signs of the underlying fraudulent conduct by an unregistered CTA who solicited the retail forex customer to open an account with Gain UK,” it said.

“For example, a Gain UK employee had extensive communications with the unregistered CTA and was aware that the CTA had been rejected from managing accounts with Gain UK and its affiliates because the CTA may have been soliciting managed accounts through social media and a website without registering with the CFTC.”

“Despite the unregistered CTA not being named on any of the account documents, the CTA had extensive communications with Gain UK’s employee about creating the account, directed the trading in it, and refunded commissions to the customer to reimburse significant trading losses,” it said.

It went on to say that the customer in this case experienced a loss of over a quarter of million US dollars.

Gain UK, it claims, earned $241,671.

Chris Lee

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