Utah Court sides with CFTC, orders Tallinex to pay $10.3m in restitution

Maria Nikolova

The retail FX broker which was found to have illegally solicited US clients for several years is ordered to pay nearly $10.3 million in restitution plus a civil monetary penalty of $681,888.

The case brought by the United States Commodity Futures Trading Commission (CFTC) against retail Forex broker Tallinex has come to an end, as the US regulator has managed to secure a default order against the company.

On Monday, July 9, 2018, Judge David Nuffer of the Utah District Court signed an order that imposes a permanent injunction and monetary penalties on the broker. The size of the penalties reflects the CFTC requests.

Tallinex was found to have fraudulently solicited US retail forex customers by making false and misleading misrepresentations of material fact and omitting material information, including but not limited to: (a) falsely representing that Tallinex could do business in the United States; (b) misrepresenting and omitting the likelihood of profit and risk of loss involved in trading their forex contracts; (c) falsely and misleadingly representing the safety of customer funds in the event of Tallinex’s financial collapse (i.e., counterparty risk).

The broker falsely represented to U.S. customers that it could do business in the U.S. by stating on its website that it “welcomes residents of the U.S.” and using at least one domestic introducing broker (GTF) to solicit US customer accounts on Tallinex’s behalf. Furthermore, in the course of soliciting U.S. customers, Tallinex misrepresented and omitted material facts regarding the likelihood of profit and the risk of loss associated with trading Tallinex’s forex contracts.

Tallinex also misrepresented to customers that their funds were segregated, suggesting that customers were protected from risk events such as Tallinex’s financial collapse. This representation, which Tallinex posted on its website, was false.

The company was charged with four counts:

  • COUNT ONE – Violation of Section 2(c)(2)(C)(iii)(I)(aa) of the Commodity Exchange Act, and Commission Regulation 5.3(a)(6)(i) – Operating As an Unregistered Foreign Exchange Dealer;
  • COUNT TWO – Violation of Sections 4b(a)(2)(A) and (C) of the Commodity Exchange Act, and Commission Regulation 5.2(b)(1) and (3) – Fraud by Misrepresentations and Omissions of Material Fact;
  • COUNT THREE – Violation of Section 6(c)(1) of the Commodity Exchange Act, and Commission Regulation 180.1 – Fraud by Use of a Manipulative Device, Scheme, Artifice or Course of Business;
  • COUNT FOUR – Violation of Commission Regulation 5.5 – Failure to Provide Disclosure Statement.

Tallinex is ordered to pay restitution in the amount of $10,289,391, plus post-judgment interest. To effect payment of the Restitution Obligation and the distribution of any restitution payments to Tallinex’s customers, the court appoints the National Futures Association (NFA) as Monitor.

Pursuant to Rule 71 of the Federal Rules of Civil Procedure, each customer of Tallinex who suffered a loss is explicitly made an intended third-party beneficiary of this Order and may seek to enforce obedience of this Order to obtain satisfaction of any portion of the restitution that has not been paid by the broker to ensure continued compliance with any provision of this Order and to hold Tallinex in contempt for any violations of any provision of this Order.

The broker also has to pay a civil monetary penalty in the amount of $681,888, plus post-judgment interest.

The case is now closed.

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