July 19, 2018
Federal Court Orders Estonian Forex Dealer to Pay over $10 Million in Sanctions for Defrauding U.S. Customers and Orders Introducing Broker that Solicited for Dealer to Pay $85,000 Penalty
Tallinex Ltd. Ordered to Pay nearly $10.3 Million in Restitution to Defrauded Customers and Defendants Ordered to Pay Civil Monetary Penalties Totaling More than $760,000
Washington, DC -The U.S. Commodity Futures Trading Commission (CFTC) announced that Judge David Nuffer of the U.S. District Court for the District of Utah entered an Order for Final Judgment by Default against Tallinex, a/k/a Tallinex, Ltd. (Tallinex), an Estonian company that was licensed to do business in St. Vincent and the Grenadines. The Default Order requires Tallinex to pay $10,289,391 in restitution to U.S. customers and a civil penalty of $681,888. The Order, entered on July 9, 2018, also permanently prohibits Tallinex from violating the Commodity Exchange Act, as charged.
Judge Nuffer also entered a Consent Order on June 26, 2018, against General Trader Fulfillment (GTF), a Nevada company operating out of Pleasant Grove, Utah that introduced U.S. customers to Tallinex. The Consent Order requires GTF to pay an $85,000 civil monetary penalty and permanently prohibits GTF from violating the CEA, as charged.
The Court’s Orders stem from a CFTC Complaint filed on May 30, 2017 (see CFTC Complaint and Press Release 7568-17: CFTC Charges Estonian Company Tallinex with Fraud and Failure to Register as a Retail Foreign Exchange Dealer and Nevada Company General Trader Fulfillment with Failure to Register as an Introducing Broker).
The Default Order
The Default Order found that Tallinex operated as an unregistered foreign exchange (forex) dealer by soliciting or accepting orders for leveraged or margined forex transactions from retail U.S. customers, and offered to be or was the counterparty to such contracts with its customers without being registered with the CFTC as a retail foreign exchange dealer. The Order also found that Tallinex defrauded these customers by knowingly or recklessly misrepresenting or omitting material facts. Specifically, the Default Order found that Tallinex falsely represented that it was lawfully doing business in the United States, falsely and misleadingly represented that customer funds were segregated and protected in the event of Tallinex’s financial collapse, and Tallinex failed to disclose risks but promoted extraordinary profits of between 162.29% up to 1301.10% to create the impression that forex investments made with it were likely to be profitable so that it could increase its number of customer accounts.
The Consent Order
The Consent Order finds that GTF, which was in the business of providing forex trading instruction, paid “coaches” to teach its customers forex trading using hypothetical accounts. The Order finds that at least one coach introduced U.S. customers who were non-ECPs, i.e., not eligible contract participants, to Tallinex for the purposes of opening and maintaining individual forex trading accounts at Tallinex and participating in off-exchange retail forex transactions at Tallinex. The Order also finds that by so doing, GTF acted as an introducing broker without being registered with the CFTC, as required.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
The CFTC thanks and acknowledges the Estonian Finantsinspektsioon/Financial Supervision Authority, the St. Vincent and the Grenadines Financial Services Authority, the Bulgarian Financial Supervision Commission, and the Czech National Bank for their assistance in this matter.
The CFTC Division of Enforcement staff members responsible for this action are Camille Arnold, Diane Romaniuk, Joy McCormack, David Terrell, Scott Williamson and Rosemary Hollinger.
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CFTC’s Foreign Currency (Forex) Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.
Also before investing or trading with a firm, check the firm’s registration status and disciplinary history, if registered, with the National Futures Association. A company’s registration status can be found at: www.nfa.futures.org/basicnet.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.