The Commodities Futures Trading Commission filed a complaint against an Estonian unregistered forex dealer it said was misrepresenting trading risk and other fraud.
“The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the District of Utah against Tallinex a/k/a Tallinex Limited (Tallinex), of Tallinn, Estonia, and General Trader Fulfillment (GTF), a Nevada company doing business in Pleasant Grove, Utah.” The CFTC stated.
The CFTC said Tallinex made these three misrepresentations: 1) falsely representing that Tallinex was lawfully doing business in the United States, 2) misrepresenting and omitting the likelihood of profits and risk of loss involved in trading their forex contracts, and 3) misrepresenting the safety of customer funds in the event of Tallinex’s financial collapse.
According to CFTC’s complaint, here are some other concerns: 1)The website does not ask questions to determine if potential traders are suitable 2) solicits margins as high as 1:1000 3)requires small minimum balance $100- to lure in inexperienced and unsuitable traders 4) Tallinex determines the spread for the forex contracts it offers to customers. and 5) the website does not require the trader to state if they can deliver the margin requirement.
Dodd/Frank required forex dealers who marketed off-exchange forex products to be registered with the CFTC.
With off-exchange securities, the broker is the so-called counter-party- they represent the other side of the trade- meaning for the trader to make money the broker must lose money.
Starting in September 2012, Tallinex, primarily using its website, tallinex.com, began soliciting customers in the US, according to the CFTC complaint, these customers were deemed “not eligible contract participants (non-ECPs).”
Tallinex continued soliciting these customers in the US with their website even saying, “Tallinex welcomes residents of the U.S. . . . and provides them with the same leverage and hedging facilities as non-U.S. . . . residents.”
While they did this, the company did not register with the CFTC, made misrepresentations of the safety of the investment, and of the customer’ money in case of collapse.
In September 2016, the company stopped soliciting business on its website in the US.
As of publication, this message greets visitors of the website: “Tallinex does not solicit residents of the United States, Canada or St Vincent and The Grenadines in relation to the provision of retail Forex services, and no option exists for residents of those countries to apply for retail Forex services due to regulatory requirements.”
But the CFTC stated the company continued to solicit funds in the US: “However, on information and belief, Tallinex still solicits and accepts funds from U.S. customers,” the CFTC stated in their complaint.
The CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws, as charged.
The CFTC also reminded potential traders of its forex fraud alert where traders should be aware of these four things:
- Lead you to believe you can profit from current news already known to the public.
- Made through word of mouth referrals or emails from friends and relatives, members of community organisations, churches, or social groups.
- Contacts you asking for personal information such as your name, phone number, and email and home addresses.
- Promising that with Forex there is no “down-turning market”.
An email to Tallinex was left unreturned.