The CFTC has filed civil injunctions against International Commodity Advisors , ProfitStars Int’l Corp. , and Paragon FX Enterprises. According to the Commission, ICA is an unregistered Commodity Pool Operator (“CPO”), and PSI failed to disclosed to customers that their retail foreign exchange (Forex) Paragon FX was not registered as a Retail Foreign Exchange Dealer (RFED). Charges have also been filed against Gregory W. Seitz and Ulysis K. Starling, principles of ICA and PSI respectively.
According to the complaint, ICA and Seitz, managed and traded client funds in retail, leveraged forex transactions from October 2010 to December 2010. They also operated a forex pooled investment vehicle called ICA Forex CP I LP. In order to operate such a pool, the CFTC requires firms to register as and comply with the regulations for CPOs. However, ICA never registered as such. Furthermore, the ICA never disclosed to customers that their forex pool was not registered as an RFED, as required by law.
Similarly, the Commission alleges that PSI and Starling operated a pooled investment vehicle that managed and traded customer funds in retail, leveraged forex transactions using a third party. That third party, Paragon FX, was operating unlawfully as an RFED. PSI claimed a disclosure exemption, but was not entitled to this exemption because many of the pool’s participants were not qualified eligible participants. On November 10, a judge froze PSI’s assets, prohibited the destruction of the firm’s books and records, and has granted the CFTC access to these records.
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Finally, the third CFTC complaint alleges that Paragon FX accepted orders from non-eligible contract participants in retail, leveraged OTC forex transactions between October and December 2010, but failed to register as an RFED. A judge has prohibited the destruction of the RFED’s books and records, and at a show cause hearing in early November partially froze the firm’s assets.
The CFTC is seeking restitution, disgorgement of ill-gotten gains, civil monetary penalties, and permanent injunctive relief.
The CFTC is trying hard to make it difficult for unregulated entities operating, however the regulated brokers are having to pay the price with new capital requirements, do the regulators intend to drive out FX completely from the US?