ARTICLE
14 October 2019

Interdealer Brokers Settle CFTC And NYAG Charges For Fraudulent FX Options

CW
Cadwalader, Wickersham & Taft LLP

Contributor

Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
Two interdealer brokers ("IDBs") settled separate New York Attorney General ("NYAG") and CFTC charges for fraudulent practices involving foreign exchange currency options.
United States Finance and Banking

Two interdealer brokers ("IDBs") settled separate New York Attorney General ("NYAG") and CFTC charges for fraudulent practices involving foreign exchange currency options.

According to NYAG Orders (see here and here) and the CFTC Orders (see here and here), the IDBs made false statements to clients that (i) certain bids and offers could be executed and (ii) certain trades had taken place. NYAG and the CFTC stated that by doing this, the IDBs created the impression of greater liquidity than there actually was. The IDBs, according to the NYAG, also printed fake trades that were intended to induce traders to enter into genuine "follow-on" trades at a level that the IDBs had falsely reported.

To settle NYAG charges, the IDBs each agreed to (i) pay separate penalties of $5 million and $7.5 million, (ii) implement policies and procedures to prevent similar violations and provide training to employees and (iii) hire an independent monitor to report their findings to the NYAG over the course of a year.

To settle the CFTC charges, the IDBs each agreed to (i) cease and desist from further violating CFTC regulations, (ii) pay separate penalties of $10 million and $15 million, with credit applied for penalties paid to NYAG, and (iii) comply with the conditions and undertakings outlined in their respective Orders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More