Effex Capital, implicated in FXCM’s US exit, gets more time to reply in lawsuit

Maria Nikolova

Judge Paul A. Crotty agrees to give Effex Capital and its CEO John Dittami three more weeks to reply to claims brought by ex-FXCM clients.

Effex Capital, the company whose name was implicated in FXCM’s exit from the United States retail Forex market, has won a short extension to the time to reply to accusations brought against it and its CEO John Dittami by former FXCM clients.

On Monday, January 29, 2018, Judge Paul A. Crotty of the New York Southern District Court agreed to give Effex and Dittami three more weeks to file their motion to dismiss the complaint launched by the former clients of the broker. Under the adjusted schedule, the date to file this motion is now set for March 6, 2018.

Effex and Dittami explained that the extension should allow the parties in the case to explore a potential resolution of the matter.

The case, captioned 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. The case also targets FXCM Inc, now known as Global Brokerage Inc (OTCMKTS:GLBR), Forex Capital Markets LLC, Global Brokerage Holdings, Drew Niv and William Ahdout.

The action accuses the defendants of, inter alia, breaches of fiduciary duty and duty of best execution, the aiding and abetting thereof, breach of contract, breach of the implied covenant of good faith and fair dealing, gross negligence, unjust enrichment, and violations of the Commodities Exchange Act, 7 U.S.C. § 1 et seq.

Whereas the action was automatically stayed against Global Brokerage, as a result of its filing for bankruptcy on December 11, 2017, the proceedings against the other defendants, including Effex and Dittami, continue.

In their previous objections to the plaintiffs’ claims, Effex and Dittami have argued 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 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.

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