Santa Ana, CA – The U.S. Commodity Futures Trading Commission (CFTC) filed suit against Forex Liquidity LLC, a registered Futures Commission Merchant, on December 13, 2007, alleging the firm was severely undercapitalized and failed to maintain accurate financial records. The case, filed in the U.S. District Court for the Central District of California, claims Forex Liquidity had a net capital deficit of approximately $11.6 million as of December 7, 2007.
According to the CFTC complaint, Forex Liquidity was required to maintain a minimum adjusted net capital of $1 million as a Forex Dealer Member of the National Futures Association (NFA). However, the firm’s net capitalization was reportedly significantly below this threshold, potentially dating back to November 30, 2007.
The CFTC also alleges Forex Liquidity provided false information regarding its assets. The firm claimed to possess a $35 million ABN-AMRO bond held in Switzerland and stated the proceeds had been transferred to Commonwealth Financial Network (CFN), a U.S. registered broker dealer. However, CFN confirmed it has no account for Forex Liquidity and the account number provided to the NFA was fabricated.
Furthermore, the complaint details that Forex Liquidity was unable to produce the necessary financial documentation to verify its assets and liabilities, constituting a failure to maintain accurate books and records.
On December 14, 2007, the CFTC secured an asset freeze and emergency relief, enabling the agency to seize the remaining assets of Forex Liquidity and protect customer interests. U.S. District Judge Cormac J. Carney issued a restraining order, prohibiting the firm from destroying documents and restricting access to its books and records.
The CFTC is seeking a permanent injunction, monetary penalties, and other relief in the ongoing court action. The National Futures Association provided assistance in the investigation. The case is being handled by CFTC staff members Peter Haas, Richard Foelber, Paul Hayeck, and Joan Manley.
Source: CFTC.gov
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