CFTC action against FX broker JAFX set to budge as Judge encourages parties’ meeting

More than five months have passed since the United States Commodity Futures Trading Commission (CFTC) secured an Order of Permanent Injunction and Other Statutory and Equitable Relief Against unregistered retail Forex firms JAFX, LTD aka JAFX, EOOD. Now, the case is finally set to see some progress as Magistrate Judge Dustin B. Pead of the Utah District Court has ordered the parties to meet and confer.

In an Order issued on July 1, 2019, and seen by FinanceFeeds, the Judge says that, in order to secure the just, speedy, and inexpensive determination of the action, it is ordered that the CFTC must propose a schedule to the defendants in the form of a draft Attorney Planning Meeting Report within the earlier of 14 days after entry of the Order. Within 28 days after entry of the Order, the parties shall meet and confer.

At the meeting, the parties have to either file a jointly signed Attorney Planning Meeting Report and also email a stipulated Proposed Scheduling Order, or the parties must be prepared to address a number of questions, concerning, inter alia, the core factual or legal issues that are most likely to be determinative of the dispute or the important witnesses each side needs to depose.

In July 2018, the CFTC launched an action against JAFX which claimed to be operating from St. Vincent and the Grenadines, as well as Bulgaria.

Back in July, the CFTC sought injunctive and other equitable relief, as well as the imposition of civil penalties, for violations of the Commodity Exchange Act and the Commission’s Regulations. Specifically, the CFTC complaint charged JAFX with operating as an unregistered foreign exchange dealer, and failing to provide customers with the required Risk Disclosure Statement.

In February 2019, to effect partial settlement of the matters alleged in the complaint, JAFX has consented to the entry of a Consent Order of Permanent Injunction and Other Relief Against JAFX, LTD. aka JAFX, EOOD.

Beginning in at least September 2015 and continuing to the present JAFX, using the website http://www.JAFX.com and videos on YouTube, is, or has offered to be, the counterparty to leveraged, retail FX transactions for customers located in the United States who are not Eligible Contract Participants (ECPs), without being registered with the Commission as a retail foreign exchange dealer (RFED).

While the website contains language noting that the solicitations are “not directed at U.S. customers,” there is nothing in the online account application stating JAFX does not accept US customers, nor are US customers prevented from opening accounts. The application process contains a drop-down menu of companies from which JAFX accepts customers; the first country listed is the “United States.” U.S. customers may open an account with JAFX with as little as $100.

Furthermore, JAFX’s online account application does not seek any information about prospective customers’ ability to send or receive actual delivery of forex or customers’ business need for Forex.

Throughout the relevant period, each time JAFX opened an account for a retail forex customer to engage in retail forex transactions, it failed to provide each retail forex customer with a written Risk Disclosure Statement.

The CFTC has also alleged that JAFX neither advises actual and prospective US customers in its solicitations that JAFX is required to be registered with the Commission as an RFED, nor does JAFX advise actual and prospective customers that it is acting unlawfully by operating as a RFED in the US without such registration. In the FAQ section of the website, JAFX appears to acknowledge its unlawful conduct by stating: “JAFX is currently not regulated. Regulation takes a very long time to setup and we are in the process of applying for regulation.”

Under the Consent Order, JAFX is, among other things, permanently restrained, enjoined and prohibited from soliciting or accepting orders from U.S. resident non-ECPs in connection with leveraged or margined forex transactions and acting as or offering to be the counterparty to the forex transactions. The companies are also prohibited from opening retail Forex trading accounts for US resident retail customers without providing customers a written disclosure statement with the disclosures.

JAFX is also permanently restrained, enjoined and prohibited from trading on or subject to the rules of any registered entity, as well as from entering into any transactions involving “commodity interests”, for its own personal account or for any account in which it has a direct or indirect interest. It also prohibited from having any commodity interests traded on its behalf.

JAFX shall pay disgorgement, plus post-judgment interest, to the CFTC. The amount of disgorgement and civil monetary penalty will be determined by the Court.