TFS-ICAP, Ian Dibb, Jeremy Woolfenden respond to CFTC complaint

In line with earlier FinanceFeeds’ reports, TFS-ICAP, its former Chief Executive Officer Ian Dibb, and former Head of Emerging Markets broking Jeremy Woolfenden have responded to a complaint by the Commodity Futures Trading Commission (CFTC), charging the defendants with fraud.

The responses by the defendants were filed with the New York Southern District Court on February 21, 2020.

Let’s recall that, according to the CFTC Complaint, from approximately 2008 through 2015, brokers at TFS-ICAP offices in the United States and the United Kingdom attempted to deceive and deceived their clients by engaging in the practices of communicating to them fake bids and offers and fake trades in the foreign exchange options market. The CFTC Complaint alleges that the practices, known as “flying prices” and “printing trades”, were a core part of TFS-ICAP’s broking business.

The complain also alleges that certain senior managers at TFS-ICAP knew or had constructive knowledge that brokers at TFS-ICAP regularly flew prices and printed trades throughout the Relevant Period but did nothing to prevent or deter these deceptive practices. These managers are Jeremy Woolfenden, former Global Head of Emerging Markets of TFS-ICAP, and Ian Dibb, the CEO of TFS-ICAP from approximately 2011 to 2017.

In its response to the CFTC’s complaint TFS-ICAP mentions the following affirmative defenses:

• 1. Plaintiff’s Complaint fails to state a valid claim against the Companies.
• 2. Plaintiff’s Complaint fails to state a valid claim against the Companies for violation of the Commodity Exchange Act for acts occurring prior to the effective date of the Dodd Frank Act.
• 3. The CFTC’s claims are barred to the extent they seek relief for alleged conduct that occurred before the CFTC had authority over “swap” activity, as defined in the applicable provisions of the Dodd-Frank Act, which took effect on October 12, 2012.
• 4. Plaintiff’s claims alleged against the Companies relating to FX options activities that occurred outside the United States with non-U.S. customers or counterparties do not violate the Commodity Exchange or CFTC Regulations.
• 5. The CFTC’s claims are barred to the extent they seek relief for alleged conduct that had no “direct and significant connection with activities in, or effect on, commerce of the United States,” as required by Section 2(i) of the Commodity Exchange Act. 7 U.S.C. § 2(i).
• 6. Plaintiff’s claims of violations by the Companies prior to January 28, 2012 are barred by the applicable statute of limitations.
• 7. The Companies reserve the right to assert all other affirmative defenses that may be revealed during the course of discovery.

Let’s note that the Court has already addressed some of these arguments when it nixed TFS-ICAP’s motion to dismiss. Regarding TFS-ICAP’s argument that the complaint fails to allege facts showing that TFS-ICAP’s with non-US market participants had a direct and significant connection with activities in, or effect on, US commerce, the Court said it was satisfied with the CFTC’s explanation of the limit of the relief it seeks from TFS-ICAP. In particular, the requested relief addresses actions during the period when TFS-ICAP brokered FX options for US clients.

Further, the Judge ruled that the CFTC’s complaint complies with Rule 9(b) because it alleges specific occurrences of flying prices and printing trades. For example, the complaint includes details regarding printed trades on April 15, 2015, May 12, 2015, and July 20, 2015. The complaint also includes details about a flown price on April 4, 2014.

Ian Dibb’s response to the CFTC’s complaint lists 23 affirmative defenses. Several of them were already present in Dibb’s motion to dismiss, which was denied by the Court in January this year. As one might expect, the list of affirmative defenses includes assertions that the New York Southern District Court lacks personal jurisdiction over Ian Dibb and that the CFTC’s claims are barred to the extent they seek relief for alleged conduct that had no “direct and significant connection with activities in, or effect on, commerce of the United States,” as required by Section 2(i) of the Commodity Exchange Act. 7 U.S.C. § 2(i).

The list of affirmative defenses listed by Jeremy Woolfenden is similar. His response to the CFTC’s complaint enlists 24 affirmative defenses, and he also argues (inter alia) that the New York Southern District Court has no personal jurisdiction over him and that the CFTC’s claims are barred to the extent they seek relief for alleged conduct that had no “direct and significant connection with activities in, or effect on, commerce of the United States.”

Jeremy Woolfenden has also failed to dismiss the CFTC’s complaint against him. As FinanceFeeds reported, in November 2019, Judge Victor Marrero of the New York Southern District Court issued an order nixing Woolfenden’s motion to dismiss.

The order was issued after the CFTC provided a set of documents as evidence that Woolfenden had contacts with US brokers and was aware of illicit practices known as flying & printing.

Back in November, the Judge noted that the CFTC’s allegations against Woolfenden sufficiently establish a prima facie showing that specific jurisdiction is warranted. The CFTC alleges that Woolfenden supervised, controlled, and communicated with TFS-ICAP brokers in the United States and the United Kingdom who “flew prices” and “printed trades” in the course of business directed towards TFS-ICAP New York-based clients.

Based on his alleged role as described in the Complaint and the record, the Court said it was persuaded that Woolfenden’s dealings rise to the level of minimum contacts with the forum in the United States and support the Court’s exercise of personal jurisdiction over him.

The Judge also said that the CFTC’s exhibits provide additional support for the allegations in the Complaint that Woolfenden exercised supervisory control over employees in the United States.

The lawsuit continues at the New York Southern District Court.