CFTC Fines IB Capital FX over $35 Million for Operating Unregistered Scheme

New Zealand-registered forex broker IB Capital FX, known under the trade name IB Capital, and its two agents are required to pay jointly $35.42 million to settle claims of soliciting funds for retail forex trading without being registered, the U.S. Commodity Futures Trading Commission (CFTC) said today.

Specifically, the U.S. derivatives regulator stated that the company and its employees, Michel Geurkink and Emad Echadi, illegally accepted at least $50 million from approximately 1,850 customers in the U.S. and other countries, while they have never been registered in any capacity with the commission. In addition, IB Capital and the two agents, who were front men for its operation, didn’t qualify for an exemption from the registration requirements.

IB Capital FX is alleged to have carried out these operations from at least January 1, 2012 through September 18, 2012.

The CFTC said the defendants illegally earned $35 million through accepting forex orders and operating as a counterparty on the clients’ trades, which is in breach of US regulations. However, the order also noted that Geurkink and Echadi returned to customers a portion of the $51.6 million in the form of redemptions, refunds, and other payments. Wrongdoers may not have sufficient funds

As a result of their actions the commission seeks full restitution to ‎defrauded participants, disgorgement of any ill-gotten gains and a civil monetary ‎penalty. In addition to the fiscal penalties, the CFTC seeks a permanent injunction to bar Echadi and Geurkink from working for a registered retail foreign exchange dealer in the future or registering themselves.

Finally, the CFTC warned victims that although it works closely with foreign authorities to seek prompt return of all misappropriated funds, wherever situated, they may not recover ‎their lost money because the wrongdoers may not have sufficient funds ‎or assets.‎

The Commission also said it has collaborated with several regulators from various jurisdictions globally. The CFTC has therefore thanked the following regulators for their assistance: the Dutch ministry of justice, ASIC of Australia, the FCA of the UK, the Hungarian watchdog, New Zealand’s FMA, and the New Zealand Serious Fraud Office.