Effex Capital, CEO Dittami seek to dismiss former FXCM clients’ allegations

Maria Nikolova

Effex Capital and John Dittami argue they are not liable for aiding FXCM’s, Drew Niv’s and William Ahdout’s alleged breach of fiduciary because no such duty was owed by FXCM to its clients.

Effex Capital and its CEO John Dittami whose names were implicated in FXCM’s exit from the US retail Forex market, are pushing to dismiss allegations against them by former clients of the broker. Earlier this week, the case, captioned Nguyen v. FXCM Inc. et al (1:17-cv-02729), was stayed against the so-called “FXCM Defendants”, including Global Brokerage Inc (NASDAQ:GLBR), formerly known as FXCM Inc, Forex Capital Markets LLC, Global Brokerage Holdings, Drew Niv, and William Ahdout. The case also targets Effex and Mr Dittami.

On Friday, October 27, 2017, Effex and its CEO filed a Letter with the New York Southern District Court, seeking the Court’s permission to submit a motion to dismiss certain allegations made by the Plaintiffs in their amended complaint.

Effex and Dittami argue they are not liable for control person liability under the Commodities Exchange Act. Also, Effex and its CEO claim that they are not liable for deceptive acts or practices under Section 349 of the New York General Business Law because the plaintiffs have failed to “make a threshold showing that the challenged act or practice was consumer oriented”. In addition, the plaintiffs are said to have failed to allege any deceptive acts by Effex or Dittami.

Effex and Dittami claim that they are not liable for violation of California’s unfair competition law because this law’s protections do not extend to securities transactions. Even if they did extend to such transactions, the plaintiffs are said to have failed to allege that Effex and Dittami engaged in “unlawful, unfair or fraudulent business act or practice”.

Plaintiffs’ allegations about Effex and Dittami’s violations under the Oregon Unlawful Trade Practices Act, the Wisconsin Law and the South Carolina Unfair Trade Practice Act are also contested.

Effex and Dittami also argue that the Plaintiffs’ count for unjust enrichment fails under both New Jersey and New York law. Effex and Dittami say that the former FXCM customers have failed to plead a direct relationship between themselves and Effex (or Dittami) which is required by New Jersey law. Regarding the New York Law, the plaintiffs are said to have failed to allege that they bestowed a benefit on Effex and/or Dittami for which they expected to be paid.

Importantly, Effex and Dittami say they are not liable for aiding and abetting the FXCM defendants’ purported breach of fiduciary because no such duty was owed by the FXCM defendants to plaintiffs and the putative class members. “Under New York law, the mere existence of a broker-customer relationship is not proof of its fiduciary character”, Effex and Dittami argue, referring to the case Welch v TD Ameritrade Holding Corp, 2009.

Nguyen v. FXCM Inc. et al (1:17-cv-02729) is a class action brought on behalf of all customers of FXCM who, between March 1, 2010 and February 6, 2017, placed trade orders through FXCM’s “No Dealing Desk” platform while FXCM publicly maintained that FXCM had no conflict of interest in the outcome of that trade.

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