UK firm pleads guilty in major forex fraud case

Chris Lee

A Britain-based broker and its US sister company have submitted guilty pleas in a securities fraud case involving falsified foreign exchange trades.

TFS-ICAP Ltd in the UK and TFS-ICAP LLC in the US both said that they had inserted false trades into their forex options set-up for emerging markets around the world.

According to those prosecuting the case, the firms’ crimes stretch back to January 1st, 2007 and continued until as recently as December 31st, 2015.

Using technological communication methods, the firms’ brokers would tell traders based in the US that a host of new trades had been placed in forex options markets in Latin America.

This created the illusion that the markets were more liquid than they actually were. However, the trades were in fact, fake, leading traders to be misled.

The investigation focused in part on the involvement of managers and other senior leaders at the firms. It is believed that these individuals were fully aware of the fraud and permitted its continuation.

The office of the New York state Attorney General, Barbara Underwood, investigated the case.

Over the course of three years, the office read and listened to written and voice-based messages between staff members and out to bank traders stretching back two years.

As part of the complex and tech-focused investigation, it also looked at the firms’ internal emails. Trade blotters, which record information on trades placed, were also scrutinised.

According to court documents, the firms faced New York City Criminal Court Administrative Judge Kevin McGrath.

During this hearing, the firms admitted to a single count of securities fraud contravening the Martin Act, which is a New York state law giving the local government the power to vigorously pursue securities fraud cases.

In the end, the firms agreed to a civil settlement with the Attorney General.

A comprehensive range of punishments have now been levied on the companies as part of this process. They will need to pay the sum of $1.15 million US dollars in penalties, and they will also have to change their policies.

They will be required to revise their procedures to ensure increased openness around bids and offers. For the next 24 months, the firms will have to let an independent oversight provider check their activities.

In addition, two senior members of staff on the anti-fraud team will need to be dismissed.

Aside from these punishments, individuals at the firms will now also face a separate criminal investigation. It is understood that the Attorney General is looking at both a group of brokers and members of the senior management teams

As part of this round of punishments, the two firms have agreed to help with this investigation.

In a statement, Underwood said that her team would always ensure it came down heavily on perpetrators of fraud.

“My office will pursue financial frauds – no matter how sophisticated – and hold financial institutions accountable for their conduct,” she said.

“Our investigation into fraudulent conduct in the foreign exchange currency options market continues.”


Chris Lee

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