Forex firm fined record $100m for fraud

The final court opinion results from an action brought by the commission in July 2002 against the firm, its former president and chief executive John Robinson and IFS board member Chan Kow Lai.

The total penalties are the largest recorded for the CFTC since it became responsible for the activities of FX futures trading firms under the December 2000 Commodity Futures Modernization Act.

The ruling found that the firm had deliberately set out to lose its clients' money while making commissions on every trade it completed. The order of final judgement said: "Every dollar that was lost by a customer was a dollar gained by [the defendants]."

IFS charged clients $90 per round turn. As traders' commissions were based on volumes, this led to the firm executing trades contrary to its clients' interests, according to the judgement.

In some cases traders were told to open offsetting positions instead of closing loss-making positions. Ezra Zask, witness for the CFTC and chief executive of alternative investment fundraiser Ezra Zask Associates of Connecticut, said this often led to further losses due to traders' inexperience in trading currencies.

IFS sales staff also misled clients as to how their money would be traded; stating no more than 30% would ever be exposed to the market with the rest held in accounts at JP Morgan Chase. However, JPMC had no record of these accounts.

Gregory Mocek, the CFTC's director of enforcement in Washington, said of IFS: "These fraudulent forex firms are like cockroaches that need to be exterminated."

The defendants did not dispute the evidence provided, instead choosing to plead the Fifth Amendment, on the grounds of avoiding self-incrimination, and questioning the CFTC's authority in the matter.