NFA seeks to dismiss case brought by Effex Capital, involved in FXCM US troubles

Maria Nikolova

In its Motion to Dismiss, NFA reiterates that it has absolute immunity as when publishing its press release and complaint about FXCM and Effex Capital, it was executing its regulatory responsibilities.

The United States National Futures Association (NFA) which has been the target of a case brought by Effex Capital, the company whose relations with FXCM were the key reason for the February events that led to the broker’s exit from the US retail Forex market, on Tuesday once again sought to rebuff Plaintiffs’ allegations.

In the case, Effex Capital alleges that NFA, in publishing the materials (settlement, press release, complaint, etc) about FXCM on its website on February 6, 2017, disclosed trade secrets, made false claims and caused harm to Effex and its CEO John Dittami. Recently, Effex added Thomas W. Sexton, President and Chief Executive Officer of NFA, as well as James P. O’Hara, a member of NFA’s Business Conduct Committee, to the list of defendants in the case. Mr Sexton and Mr O’Hara are accused of being responsible for the publication of the allegedly defamatory materials.

On Tuesday, August 15, 2017, NFA filed a Motion to Dismiss the amended complaint by Effex and its CEO John Dittami, with the formal cause for that being “failure to state a claim”.

NFA reiterates that as a self-regulatory organization it has absolute immunity because “all Effex’s claims continue to arise out of defendants’ execution of NFA’s regulatory responsibilities”. Also, Effex is alleged to lack a private cause of action for its federal due process claims.

The Amended Complaint, according to NFA and other defendants in the case, fails to state a claim upon which relief can be granted. The defendants assert that Effex’s state-law tort claims are barred by state-law privileges and that Effex fails to adequately allege all required elements of its claims for alleged violations of federal due process, state laws governing defamation, interference with business relations, interference with economic advantage, and trade secret misappropriation.

In the meantime, Effex Capital has also filed a document with the court. It insists that the materials NFA made public on February 6, 2017, are “ripe for misuse by those with knowledge of the foreign currency exchange markets”.

The company notes that although the exhibits are in the public domain, “to certain persons with specified knowledge, they provide a roadmap and confirmation of Effex’s Trade Secrets, a proprietary forex trading platform, which can be reversed engineered to the detriment of the Plaintiffs”.

The case, captioned Effex Capital, LLC et al v. National Futures Association et al (1:17-cv-04245) continues at the Illinois Northern District Court. FinanceFeeds is closely examining all filings in the case, however many of the documents are sealed.

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