Stephanie Ann Gallitano of Jacksonville, Florida, has been ordered to pay $5.043 million in restitution and penalties to settle charges of defrauding over 250 customers through her foreign currency (forex) options trading companies, Financial Risk International, Inc. (FRI) and Financial Risk Management, Inc. (FRM). The judgment, entered on October 1, 2008, by the U.S. District Court for the Southern District of Florida, also permanently bans Gallitano from participating in any commodity-related trading.
The Commodity Futures Trading Commission (CFTC) originally filed charges against Gallitano and her companies in January 2007. The court found that, between March 2004 and April 2006, FRI and Gallitano engaged in a fraudulent scheme to solicit customers into retail forex options trading accounts. Employees, directed by Gallitano, allegedly cold-called potential clients and misrepresented both the risks and potential rewards associated with forex options trading.
Specifically, the court determined that FRI and Gallitano failed to disclose critical information, including the high probability of losses – with over 98% of FRI’s customers incurring significant financial losses. Gallitano and her staff allegedly promoted a trading “spread” strategy as a guaranteed path to profit, regardless of market fluctuations. Customers were told this strategy would minimize or eliminate the risk of loss, claims the CFTC proved to be false.
The financial penalties include $3.1 million in restitution to defrauded customers and a $1,943,000 civil monetary penalty. The case was pursued by the CFTC’s Division of Enforcement, with staff members Matthew Elkan, Lacey Dingman, Kathleen Banar, Rick Glaser, and Richard Wagner leading the investigation.
The judgment was issued in Fort Lauderdale, Florida on October 1, 2008 and announced by the CFTC on October 3, 2008.
Source: CFTC.gov
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