John Dittami’s lawyers have requested extension of time to file answers in the case captioned Nguyen v. FXCM Inc. et al.
The business relationship between FXCM and Effex Capital was one of the reasons for the broker being forced to leave the US retail Forex market and to lose its registrations with the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). It was not a surprise, hence, when one of the customers of the US broker started a legal action against FXCM and Effex in mid-April this year.
The case is captioned Nguyen v. FXCM Inc. et al (1:17-cv-02729) and is one of the number of cases against FXCM filed at the New York Southern District Court.
The case was mentioned by Global Brokerage Inc (NASDAQ:GLBR), known in the past as FXCM Inc, in its report for the first quarter of 2017. The company said back then that the case in question had been filed by a customer of US. This is a class action on behalf of FXCM’s customers who traded on the “No Dealing Desk” platform during the 2010-2016 period. The plaintiffs claim that these customers suffered harm as a result of FXCM’s relationship with Effex Capital, LLC as a liquidity provider. The class action alleges (inter alia) breach of contract and breach of fiduciary duty by US and other related claims against Global Brokerage (FXCM), FXCM Holdings, Dror Niv, William Ahdout, and Effex and its principal.
As the legal burden on FXCM starts to grow exponentially, the defendants are seeking more time. According to the latest court filings, lawyers of John Dittami, Effex’s head, have submitted a motion for extension of time to file answer in the case. The letter is addressed to Judge Paul A. Crotty, who is assigned to the Nguyen v. FXCM Inc. et al case.
Effex’s CEO John Dittami was employed by FXCM beginning in 2009 as head of one of FXCM’s trading and market-making divisions. In or around March 2010, Effex was set up as an apparently independent company organized and operated by Mr Dittami. FXCM, however, supported and controlled Effex. It provided Effex with start-up capital in the form of a $2 million interest-free loan.
In exchange for the order flow that FXCM directed to Effex, Effex paid rebates to FXCM that amounted at times to up to 70% of Effex’s profits from FXCM’s order flow.