CFTC lawsuit against TFS-ICAP continues as NY Court lifts stay

A civil lawsuit brought by the Commodity Futures Trading Commission (CFTC) against TFS-ICAP LLC and TFS-ICAP Ltd. over alleged fraud and supervision failures, is set to proceed at the New York Southern District Court following an Order signed by Judge Victor Marrero earlier this week.

The action was stayed on January 3, 2019, in light of the US government shutdown. Now that the shutdown is over and the CFTC has resumed full operations, the Judge grants the CFTC’s Motion to lift the stay.

Let’s recall that, under the CFTC’s allegations, from approximately 2008 through 2015, brokers at TFS-ICAP offices in the United States and the United Kingdom attempted to deceive and deceived their clients by engaging in the practices of communicating to them fake bids and offers and fake trades in the foreign exchange options market. The Complaint alleges that the practices, known as “flying prices” and “printing trades”, were a core part of TFS-ICAP’s broking business.

In November 2018, counsel for TFS-ICAP LLC and TFS-ICAP Ltd submitted a Letter with the Court setting forth a raft of alleged deficiencies in the CFTC Complaint and requesting that these are corrected.

For example, the defendants insisted that the Complaint is deficient to the extent it seeks relief for activities engaged in by TFS-ICAP Ltd outside of the United States, as it fails to allege facts showing that any of the company’s communications with non-US market participants had a direct and significant connection with activities in, or effect on, commerce of the United States. The Complaint is also seen to have failed to plead fraud with particularity in respect of various claims brought pursuant to the anti-fraud provisions of the CEA.

In its response, the CFTC made it clear it would not amend its Complaint, arguing that TFS-ICAP LLC and TFS-ICAP Ltd. raise trifling arguments.