Defrauded forex investors win compensation

Some 250 retail foreign exchange investors are set to receive $2.7 million in compensation, after a fraud committed by Gibraltar Monetary Corporation was uncovered by the Commodity Futures Trading Commission (CFTC) in the US.

The US District Court for the Southern District of Florida last week issued a final judgement against the local company and three employees, following fraud charges brought by the CFTC. The commission found that the company and individuals had violated federal commodity laws.

Three employees were charged with defrauding a total of 253 foreign currency options customers, and the company has been ordered to pay $2.7 million in restitution. Jayson Kline, president, Charles Fremer, vice-president, and senior account executive Edward Johnson are liable.

The complaint alleged that beginning in May 2002, the defendants and Gibraltar's compliance manager Thomas Clancey, fraudulently solicited members of the public to trade foreign currency options through Forex Capital Markets (FXCM), the New York-based currency dealer.

The judge entered an order finding Gibraltar and its employees repeatedly made fraudulent misrepresentations and misleading statements to customers about the likelihood of profiting from trading FX options, while failing to disclose that the vast majority of the firm's clients were losing money.

The court noted that almost 95% of Gibraltar's customers lost most, if not all, their investments. The order also found that Kline violated the terms of the CFTC's cease and desist order from December 9, 1993.

In addition, the complaint alleged that around $3 million of Gibraltar's customer funds were deposited and traded at FXCM. The complaint alleged that via an exclusive introducing brokerage business relationship in which Gibraltar acted as FXCM's agent, the latter paid Gibraltar over $800,000 in commissions in connection with the clients' accounts Gibraltar introduced. However, FXCM was held not liable as a principal for Gibraltar's misrepresentations, misleading statements, or deceptive omissions.

Both the CFTC and the individual defendants have until July 31 to file a notice and appeal to the US Circuit Court of Appeals.