US regulators fine forex trading companies $1.8m for fraudulent retail FX trading scheme

The US District Court for the Southern District of New York has ordered Forex Capital Trading Group, Forex Capital Trading Partners and Highland Stone Capital Management to pay a civil monetary penalty of $1.3 million and banned them from trading in the off-exchange market.

The defendants are also due to repay $450,764 to defrauded customers. The order stems from an anti-fraud enforcement action filed by the Commodity Futures Trading Commission on July 27, 2011 against the three companies and their principals for gaining investments by falsely claiming several years of profits. In total, some 106 customers invested more than $2.8 million to trade retail foreign exchange.

The defendants' claims included a falsely reported customer gain of 51.94% in 2010, a year in which their customers in fact lost more than $1.2 million. Overall, customers lost more than 93% of their total invested principal through the defendants' forex trading, the order finds.

The order also finds that the defendants distributed false account statements to prospective customers, showing profitable trading, and acted in capacities requiring registration with the CFTC, but were not registered.

The CFTC's litigation is continuing against the principals of Forex Partners and Forex Group, namely Susan Davis from Jersey City, New Jersey, and David Howard II, of New York, New York, and against the principal of Highland Stone, Joseph Burgos, from Rutherford, New Jersey.

The CFTC says it appreciates the assistance of the UK Financial Services Authority in this matter.