Court gives Tallinex’s IB until June 27th to answer in CFTC case

Maria Nikolova

CFTC is seeking that Tallinex and its Utah introducing broker pay civil monetary penalties in amounts the greater of: (1) $170,472 for each violation of the Act and Regulations or (2) triple their monetary gain.

There is an update to the FinanceFeeds’ article about the US Commodity Futures Trading Commission (CFTC) starting a legal action against retail FX broker Tallinex and its Utah introducing broker General Trader Fulfillment (GTF) over illegally targeting and accepting US residents as their clients.

The Utah District Court filings show that General Trader Fulfillment was served the summons on June 6, 2017 and that its answer is due by June 27, 2017.

The relatively fast process when it comes to serving summons in the US is not surprising. We are more interested to see when (and whether) Tallinex will be served. The broker uses as a business address The Jaycees Building Stoney Ground, P.O .Box 362, Kingstown VC0100, St Vincent and the Grenadines, and also purports to have a business address in Estonia of Tornimae tn5, Kesklinna Iinnaosa, Tallina linn, Harju Maarkond 10145. How the US law representatives will reach the company is a tricky matter. The CFTC has successfully targeted overseas businesses in the past over similar matters. Back in 2013, when it launched a legal action against Sydney-based Halifax Investment Services, the defendant was served about a week after the summons had been issued.

The CFTC chose Utah for the legal action because: “Defendants transact business in this District and certain transactions, acts, practices, and courses of business alleged in this Complaint occurred, are occurring, and/or are about to occur within this District”.

We have to wait to see whether Tallinex co-operates.

As per the CFTC Complaint, which FinanceFeeds has seen, the regulator is seeking (inter alia) a Court order requiring Defendants to pay civil monetary penalties in amounts the greater of:

  1. $170,472 for each violation of the Act and Regulations

  2. triple their monetary gain.

Beginning in at least September 2012 and continuing to at least September 2016, the defendants have solicited or accepted orders from retail FX customers located in the United States, with the sum accepted in excess of $1.5 million.

During the relevant period, the FAQ section on Tallinex website stated, “Tallinex welcomes residents of the U.S. . . . and provides them with the same leverage and hedging facilities as non-U.S. . . . residents.” Moreover, Tallinex’s online application contained a drop down menu for the applicant to select his or her “country” and the U.S. was one of the choices. Although around September 2016, Tallinex changed its website to state that it does not accept US customers, the CFTC states, based on information and belief, that Tallinex still solicits and accepts funds from US customers.

Regarding the introducing broker – the CFTC alleges that GTF solicits US customers to open forex trading accounts at Tallinex as part of Tallinex’s “Introducing Broker Program.” When a customer contacts GTF to trade forex, GTF usually provides the customer with a “coach,” who GTF claims will teach the customer “how to trade forex profitably” using a demo account. Following the completion of several hypothetical trading sessions, GTF staff refer the customer to Tallinex to open a live forex account to start trading. GTF receives commissions for introducing customers to Tallinex.

Since approximately September 2012, GTF has referred at least thirty US customers who opened forex trading accounts at Tallinex.

The CFTC also notes the high leverage offered by Tallinex (up to 1:1000) and the promises of extraordinary profits, as well as the lack of provision of proper disclosure statements.

Neither Tallinex, nor GTF have been registered in the necessary capacity with the CFTC to target US retail FX customers. The defendants are alleged to have violated the Commodity Exchange Act and the Commission Regulation.

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