CFTC Cases: IB Capital Fx Ordered to Pay Over $35M in Restitution For Soliciting Investors While Improperly Registered, $21.8M Default Judgment Obtained in Commodity Pool Fraud, and Spoofing Case Leads to Over $38M in Monetary Sanctions

IB Capital FX, Two Dutch Citizens to Pay Over $35M to Customers
IB Capital FX, LLC, Emad Echadi, and Michel Geurkink must pay, severally and jointly, a $420K civil penalty and $35M in restitution for soliciting at least $50M from 1,850 customers internationally and in the US even though they lacked the required registration for trading that involved off-exchange margined retail foreign (forex) currency. Also, the firm should have been registered with the US Commodity Futures Trading Commission.

It was the CFTC that obtained the consent order, which permanently prevents the defendants from violating CFTC Regulations and the Commodity Exchange Act further. They also are now subject to permanent registration and trading bans.

$21.8M Default Judgment Issued is in Ponzi Scam
In a default judgment, Puerto Rico resident Alvin Guy Wilkinson and his Wilkinson Financial Opportunity Fund, LP and Chicago Index Partners, LP—both are Connecticut-based financial firms—will jointly and severally pay $21.8M for misappropriating commodity pool funds in a purported Ponzi scam. According to the CFTC’s order, the defendants committed fraud, did not register with the SEC, engaged in misappropriation, and made misrepresentations to the National Futures Association.

The regulator said that 30 investors bought interests in the two firms because of the promise that Wilkinson would trade financial instruments for them using a market volatility strategy. Rather than trade for the investors, Wilkinson misappropriated a lot, if not all, of their money, as well as used these funds to pay earlier investors as “profits” or a “return of capital” in a Ponzi-like scam.

Wilkinson is accused of lying to investors about the risks and profits involved. He made excuses when participants asked for their money back for why he couldn’t give the funds to them. Of the $21.8M, over $12M is a civil penalty, more ethan $4M is disgorgement of ill-gotten gains, and more than $5M is investor restitution.

Federal Court Orders British National to Pay Over $38M in Fraud
A district court judge in Chicago has submitted a consent order requiring Navinder Sing Sarao of the UK to pay nearly $13M in disgorgement and almost $26M as a civil monetary penalty. The order stems from a CFTC enforcement action brought against Sarao and his Nav Sarao Futures Limited PLC.

Acceding to the regulator, Sarao and his firm illegally manipulated, tried to manipulate, and engaged in spoofing involving a E-mini S&P 500 near month futures contract. The contract traded on the Chicago Mercantile Exchange. The CFTC said that Sarao used different kinds of spoofing tactics meant to create price fluctuations that the Defendants could take advantage of during trading. Spoofing, in general, refers to trading tricks meant to artificially move a security’s price. This is often done through the systematic entering and cancelling of trade orders.

Some of these purported manipulation attempts took place tens of thousands of times. For example, Sarao put in tens of thousands of offers and bids that he planned on cancelling before they actually went through between 7/16/11 and 4/17/15. Between 4/2010 and 4/17/15, he tried to manipulated the E-mini S&P tens of thousands of times.

Sarao and his firm have admitted to some of the allegations. He also has pleaded to criminal charges involving wire fraud and spoofing charges.

The SSEK Partners Group is a securities fraud law firm.

The Consent Order in the Sarao Case (PDF)

The Consent Order in the IP Capital FX Case (PDF)

The Order in the Wilkinson Case (PDF)