Another US broker going down the drain? |
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Create Date: 2008-07-04 14:49:36 | Popularity Level: 336 |
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2008-07-08 17:14:18
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Another US broker going down the drain? TRADE FX LLC a location for Caribbean Money Laundering?
Well - the next US broker out of the excellent regulated crowd is getting into deep problems. Here are the sources:
investforlife.wordpress.com/2008/07/03/olint-responds-to-nfa-complaints/
www.jamaicaobserver.com/news/html/20080704T020000-0500_137463_OBS_OLINT_UNDER_US_PRESSURE.asp
www.nfa.futures.org/basicnet/CaseDocument.aspx?seqnum=1620
An independent regulatory organisation in the United States has filed complaints of suspicious activity against Olint and TCI FX Traders, two investment clubs operated by Jamaican David Smith.
The National Futures Association (NFA), a self-regulatory organisation for the US futures industry, also filed a complaint to its Business Conduct Committee against I Trade FX LLC and one of its principals, Isaac Martinez.
For approximately nine months in 2007, I-Trade listed David Smith as a principal based on his having contributed almost 100 per cent of the firms capital, said the NFA in its complaint filed on June 30.
The NFA highlighted the Financial Services Commissions investigation of Olint for allegedly offering securities without a licence, and pointed to the cease and desist order issued on Olint by the FSC.
According to the NFA, it opened an investigation into Smith because of concerns it had about the source of funds he used to capitalise I-Trade.
The NFA said that as part of its investigation, it asked I-Trade to provide Smiths personal bank records. However, I-Trade claimed that it was unable to obtain Smiths bank records and, therefore, withdrew Smith as a principal on December 31, 2007 and repaid his membership interest in the firm, said the document.
Although unable to review Smiths bank records, NFA was able to review the activity in the I-Trade accounts of Smiths investment clubs (ie, Olint and TCI). NFAs review of the activity in these accounts, as well as other accounts at I-Trade, revealed suspicious activity, which I-Trade failed to report by filing a Suspicious Activity Report with federal authorities, the complaint added.
According to the NFA, highly suspicious activity occurred in a number of I-Trades customer accounts between November 2006 and April 2008. Most of the suspicious activity occurred in the accounts related to Smith (ie, Olint and TCI) and involved activity identified in both NFAs Interpretive Notice and I-Trades own AML (anti-money laundering) programme as
ed flags. This activity included extensive and unexplained wire activity; deposits followed by a request to transfer the funds to a third party without any apparent business reason; and unexplained, extensive wire activity with very low trading levels in the accounts.
The complaint, sworn to before Illinois notary public Mary Patton, also alleged that in November 2006, the NFA reviewed the activity in an account Olint opened with I-Trade in September 2006. The Olint account opening documents indicated Smith and his wife owned Olint and that the funds in the account came from them only, said the document.
During the first two months this account was open, no trading activity occurred; however, during this time, Olint made four deposits totalling approximately [US]$59 million and eight withdrawals totalling about [US]$35.5 million.
The NFA also said it identified and reviewed the activity in three other Olint accounts, which had deposits ranging from US$500,000 to US$2 million.
Said the NFA: While trading occurred in these accounts, only a fraction of the account equity in these accounts was used for trading. At the end of March 2007, Olint withdrew the bulk of the funds from these three accounts in amounts ranging from about [US]$938,000 to over [US]$1.7 million.
Smith and Martinez have 30 days from the date of the filing of the complaint in which to file written responses.
The words Regulation - Manipulation - Frustration seem to be close together. Money laundering is the minimum which should be under control by a broker. Is this company founded only for this purpose? Well the CFTC will have a closer look.
All I could say to this incredible case is already written in forums and the sources above. Nothing to add. Put them 6 feet deep beyond. |
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Francesc | 2008-08-22 12:05:49 |
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Francesc | 2008-08-22 11:09:33 |
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The NFa has release I-trade FX’s response to NFA complaints.
At this time we are not able to comment, we will do so later but here are some highlights
Ingrid Loiten
Respondents state in the affirmative that over 94%o of the funds deposited by Loiten were lost tradings.
Gareth Harris
Respondents state in the affirmative that Harris sustained trading losses in his account in excess of 9.5 million dollars, which was equivalent to over 94% of the deposits made in the account.
On David Smith we will have to revisit the document.
Here is the link
www.nfa.futures.org/basicnet/CaseDocument.aspx?seqnum=1669
NATIONAL FUTURES ASSOCIATION
Before The
BUSINESS CONDUCT COMMITTEE
In the Matter o1':
I TRADE FX LLC and
ISAAC MARTINEZ,
NFA Case No. 08-BCC-014
Respondents.
RESPONDENTS' ANSWER
Respondents I Trade FX LLC and Isaac Martinez, as their Answer to the Business
Conduct Committce's Complaint, state as follows:
Jurisdiction
Paragraph No. l. At all times relevant to this Complaint, I-frade was a futures commission
merchant C'FCM') and Forex Dealer Member (*FDM') of NFA. As such, I-Trade was and is
required to comply with NFA Requirements and is subject to disciplinary proceedings for
violations thereof.
ANSWER: Respondents admit the allegations contained in Paragraph No. 1.
Paragraph No. 2. At all times relevant to this Complaint, Martinez was a listed principal and
registered associated person ('AP') of I-Trade, and an NFA Associate in accordance with NFA
Bylaw 301(b). As such, Martinez was and is required to comply with NFA Requirements and is
subject to disoiplinary proceedings for violations thereof. I-Trade is liable for violations ofNFA
Requirements committed by Martinez during the course of his activities on behalf of I-Trade.
ANSWER: Respondents admit to the allegations contained in the first two sentences
ofParagraph No. 2, and deny the remaining allegations contained in Paragraph No. 2.
Paragraph No.3. l-Trade has been registered as an FCM since August 3, 2006 and solely
conducts retail, off-exchange forex business. Martinez is the firm's president, a registered AP,
and NFA Associate. and listcd principal of the hrm. As of NFA's April 2008 audit of I-Trade,
the firm had approximately $10 million in customer liabilities and approximately 3,000 active
customer accounts, though only nine ofthese accounts had more than $50,000 in equity.
ANSWER: Respondents admit that I-Trade has been registered as an FCM since
August 3, 2006 and that Martinez is currently I-Trade's president, that he is a NFA
Associate, and that he is a registered AP and principal of I-Trade, and deny the remaining
allegations contained in Paragraph No. 3. Respondents deny that I-Trade had only nine
accounts with $50,000 or more in equity as of April 2008, and state in the affirmative that
I-Trade had substantially more such accounts.
Paragraph No. 4. At all times relevant to this Complaint, Jacob N. Martinez ('Jacob
Martinez') and Jared F. Marlinez ('Jared Martinez') were also principals with an ownership
interest in the firm, as well as the brother and father, respectively, of Martinez.
ANSWER: Respondents admit to the allegations contained in Paragraph No. 4.
Paragraph No. 5. For approximately nine months in 2007, I-Trade listed David Smith
('Smith') as a principal based on his having contributed almost 100% of the firm's capital At
all times releyant to this Complaint, Smith lived in Turks & Caicos and operated two entities,
Olint Corporation ('Olint') and TCI FX Traders C'TCf ), which appear to be investment clubs in
the Caribbean for high net worlh individuals.
ANSWER: Respondents admit that David Smith was listed as a principle of I-Trade
starling on March 21 , 2007, but only after the NFA took six months to conduct its due
diligence investigation of Smith prior to approving Smith as a principal of I-Trade, and
that Smith voluntarily witl.rdrew as a principal of I-Trade on December 31, 2007.
Respondents further admit that Smith lived in Turks & Caicos, and that Smith was
president of TCI FX Traders, Ltd (hereinafter referred to as 'TCI-FX'), a mutual fund
licensed by the Turks and Caicos Islands Financial Services Commission. Respondents
state in the affirmative that Smith and his wife were the sole directors of Olint TCI
Corporation Ltd. (referred to hereinafter in Respondents' Answers as 'Olint-TCI'), a
limited liability company formed under the laws of the Turks and Caicos Islands, and that
Olint-TCI represented itself as an investment club for high net worth individuals.
Respondents lack knowledge or information sufhcient to form a belief as to the truth of
the allegations contained in the last sentence of Paragraph No. 5 conceming the
appearance of Olint-TCi and TCI-FX to the NFA, and deny the remaining allegations
contained in Paragraph No. 5.
Paragraph No. 6. The Financial Seruices Commission of .Iamaica ('FSC') investigated Olint
and Smith for allegedly offering illegal securities, and issued a cease and desist order in March
2006 that, among other things, prevented Olint from accepting new members. The Jamaican
Supreme Courl upheld the FSC order in December 2007.
ANSWER: Respondents admit that according to the Jamaican Ministry of Finance &
Planning issued a press release dated April 25,2006 that a cease and desist order had
been entered against OLINT Crop. Limited on March 24, 2006 for engaging in securities
activities without being registered, and state in the affirmative that no reference to Olint
TCI Corporation Ltd. was made in that release. Respondents lack knowledge or
information sufficient to form a belief as to the truth of the allegations contained in
Paragraph No. 6 as they pertain to Olint TCI Corporation Ltd. Respondents state in the
affirmative that the above referenced order was public knowledge during the six-month
period that the NFA conducted its due diligence investigation of Smith, and that as a
result of that investigation the NFA found no reason not to approve Smith as a principal
of I-Trade on March27 ,2007 ,
Paragraph No, 7. Because of concerns about Smith's background and the source offunds he
used to capitalize I-Trade, NFA commenced an investigation of I-Trade's operations. As part of
its investigation, NFA asked I-Trade to provide Smith's personal bank records. However, ITrade
claimed that it was unable to obtain Smith's Bank records and, therefore, with&ew Smith
as a principal on December 31,2001 and repaid his membership interest in the firm.
ANSWER: Respondents' lack knowledge or information sufficient to form a belief as
to the truth of the allegations made in the first sentence of Paragraph No. 7, and
Respondents state in the affirmative that an Interpol search and an inquiry with the U.S.
Department of Treasury's Office of Foreign Assets Control (OFAC) failed to reflect any
negative information about Smith and that after six months conducting its due diligence
investigation of Smith the NFA approved Smith as a principal of I-Trade on March 27,
2007. Respondents admit that NFA requested I-Trade to provide Smith's personal bank
records, and Respondents state in the afhrmative that I-Trade had no legal authority to
compel Smith to turn over such records. Respondents admit that on December 31,2007,
Smith voluntarily withdrew as a principal of I-Trade upon I-Trade's recapitalization of
the firm. Respondents deny the remaining allegations contained in Paragraph No. 7.
Paragraph No.8. Although unable to review Smith's bank records, NFA was able to review
the activity in the l-Trade accounts of Smith's investment clubs (i.e., Olint and TCI). NFA's
review ofthe activity in these accounts, as well as other accounts at I-Trade, revealed suspicious
activity, which I-Trade failed to report by frling a Suspicious Activity Report with federal
authorities.
ANSWER: Respondents lack knowledge or information sufficient to form a belief as
to the truth of the allegations contained in Paragraph No. 8. Respondents' deny that ITrade
failed to file any Suspicious Activity Reports that should have been filed.
Applicable Rules
Paragraph No. 9. NFA Compliance Rule 2-9 (c) and a related Interpretive Notice ('Notice')
require an FCM Member to develop and implement a written anti-money laundering C'AML)
program. NFA Compliance Rule 2-9 (c) states, in perlinent part, that a firm's AML program
must establish and implement policies, procedures and internal controls reasonable designed to
assure compliance with the applicable provisions of the Bank Secrecy Act, and designate an
individual (or individuals) to inrplement and monitor the day-to-day operations and program's
internal controls.
ANSWER: Respondents deny the allegations contained in Paragraph No. 9 to the
extent they conflict with or attempt to mischaracterize the express terms of NFA
Compliance rule 2-9(c) and any related Interpretive Notice.
Paragraph No. 10. Among other things, the Notice related to Compliance Rule 2-9 (c)
highlights the minimum standards that are part of an adequate AML Program, provides
additional guidance on satisfying the requirements of Compliance Rule 2- 9(c), and discusses
key components of the fimr's policies, procedures and internal controls, including detecting and
reporting suspicious activity, and identifies wire transfer activity as one area that hrms should
give heightened scrutiny and requires monitoring in this area to include review of unusual wire
transfers.
ANSWER: Respondents deny the allegations contained in Paragraph No. 10 to the
extent they conflict with or attempt to mischaracterize the express terms of NFA's
Interpretive Notice dated April 23, 2002, as revised from time-to-time (referred to
hereinafter in Respondents' Answers as the '2002 Interpretative Notice').
Paragraph No. 11. In addition, the Notice provides specific examples of 'red flags' that
should cause firms to investigate further, including:
. Extensive, sudden or unexpected wire activity; and
. A deposit, followed by a request for the money to be wired or transferred to a
third party, or another firm, without any apparent business purpose.
ANSWER: Respondents admit that NFA's 2002 Interpretative Notice identifies the
items listed in Paragraph No. 1l above as 'red flags' and state in the affirmative that
NFA's 2002 Interpretative Notice provides that those ''red flags' m35r aleft employees to
suspicious activity . . . that could cause further investigation. ' . .' (Emphasis added)
Paragraph No. 12. The Notice also states that a firm's compliance program must require
employees to notify identified firm personnel of any potential suspicious activity and such
personnel must evaluate the activity and decide whether it warrants reporting to FinCEN. For
transactions occurring after May 18,2004 an FCM must also file a Suspicious Activity Report
for Securities and Futures (SAR-SF' or 'SAR') with FinCEN.
ANSWER: Respondents deny the allegations contained in Paragraph No. 12 to the
extent they conflict with or attempt to mischaracterize the express terms of NFA's 2002
Interpretative Notice.
Paragraph No. 13. NFA Compliance Rule 2-36(e) provides that each FDM shall diligently
supervise its employees and agents in the conduct of their forex activities for or on behalf of the
FDM. Each Associate of an FDM who has supervisory duties shall diligently exercise such
duties in the conduct ofthat Associate's forex activities for or on behalfofthe FDM'
ANSWER: Respondents deny the allegations contained in Paragraph No' 13 to the
extent they conflict with or attempt to mischaracterize the express terms of NFA's
Compliance rule 2-36(e). Count I
Paragraph No. 14. The allegations set forth in paragraph 1 and I though 12 are realleged as
paragraph 14.
ANSWER: Respondents incotporate and reallege their answers to Paragraphs No. 1
and Nos. 8 through 12 above as their answer to this Paragraph No. 14.
Paragraph No. 15. In conformity with the guidance provided in NFA Compliance Rule 2-9(c)
and the related Interpretive Notice, I-Trade developed an AML program. The firm's AML
program identified the following 'red flags' as suggestive of suspicious activity:
. The customer has a questionable background or is subject of news reports
indicating possible criminal, civil, or regulatory violations;
. The customer's account has unexplained or sudden extensive wire activity,
especially in accounts that had little or no previous activityl
. The customer's account shows an unexplained high level of account activity \ iith
very low levels oftrading activities;
. The customer's account has wire transfers that have no apparent business purpose
to or lrom a country identified as a money laundering risk or a bank secrecy
haven;
. The customer maintains multiple accounts, or maintains accounts in the names of
family members or corporate entities, for no apparent purpose; and
. The customer's account has inflows of funds or other assets well beyond the
known income or resources of the customer.
ANSWER: Respondents admit the allegations contained in first sentence of Paragraph
No. 15. and Respondents state in the affirmative that Section 8.b. of I-Trade's AML
Policy provided that the activities identified above 'signal possible money laundering'
activity, and deny the remaining allegations contained in Paragraph No. 15.
Paragraph No. 16. I-Trade's AML program stated that when a firm member detected any of
these 'red flags,' he or she would investigate under the direction of the firm's AML compliance
officer. I-Trade's procedures also identified actions firm persormel could take and specifically
provided for giving a suspect account to the AML compliance officer to review certain
information. such as orders prior to entry, daily trading activity, money transfer requests and
deposits, as well as contacting the governmcnt, freezing the account, or hling a SAR-SF.
ANSWER: Respondents admit the allegations contained in Paragraph No. 16 and state
in the affirmative that the procedures identified in the second sentence of Paragraph No.
16 were discretionary depending upon the situation.
Paragraph No. 17. I-Trade's November 2006 and September 2007 AML programs identified
Martinez as the firms' AML compliance officer responsible for overseeing the firm's AML
policy. In August 2007, I-Trade hired Kim Estrada ('Estrada') as its compliance and AML
officer.
ANSWER: Respondents admit that Martinez was I-Trade's AML compliance officer
from November 2006 through November 2007 and was responsible for overseeing ITrade's
AML policy during that period, and that I-Trade hired Estrada in August 2007 to
oversee I-Trade's compliance program, and Respondents deny the remaining allegations
contained in Paragraph No. 17. Respondents state in the affirmative that Estrada was
appointed as I-Trade's AML compliance officer on November l, 2007.
Olint-TCI Account
Paragraph No. 18. As hereinafter alleged, highly suspicious activity occurred n a number of
I-Trade's customer accounts between November 2006 and April 2008. Most of the suspicious
activity occurred in the accounts related to Smith (i.e., Olint and TCI) and involved activity
identified in both NFA's Interpretive Notice and I-Trade's own AML program as 'red flags '
This activity included extensive and unexplained wire activity; deposits followed by a request to
transfer the funds to a third party without any apparent business reason; and unexplained,
extensive wire activity with very low trading levels in the accounts.
ANSWER: Respondents deny the allegations contained in Paragraph No. 18.
Paragraph No. 19. For example, in November 2006, NFA reviewed the activity in an account
Olint opened with I-Trade in September 2006. The Olint account opening documents indicated
Smith and his wife owned Olint and that the funds in the account came from them only. During
the first two months this account was open, no trading activity occured; however, during this
time, Olint made four deposits totaling approximately $59 million and eight withdrawals totaling
about $3 5.5 million.
ANSWER: Respondents lack knowledge or information sufficient to form a belief as
to the truth of the allegations contained in the first sentence of Paragraph No. 19.
Respondents deny the allegations contained in the second sentence of Paragraph No. 19,
and state in the affirmative that the representations made in the opening account
documents for Account No. 100121 indicated that Smith and his wife were the sole
directors, that Smith was the president of OlinrTCI, and that the funds for the trading
accounts were from the corporation. Respondents admit that $58 9 million were
deposited and $35.5 million were withdrawn from Account No. 100121 between
September 14, 2006 and November 22, 2006,leaving a balance of $23.4 million in the
account when trading commenced on December 20,2006. Respondents affirmatively
state that two of the withdrawals, for a total of $1,500,000 were used to fund Olint-TCI's
second account held by I-Trade (Account No. 100544), and that two additional
withdraws, for a total of $1,000,000 were used to fund Olint-TCI's third account held by
I-Trade (Account No. 100543). In addition, Respondents affirmatively state that the
trading in the OlinrTCI's second and third accounts commenced within days of the
deposits made in those accounts.
Paragraph No.20. NFA also identified and reviewed the activity in three other Olint
accounts, which had deposits ranging from $500,000 to $2 million. While trading occurred in
these accounts, only a fraction of the account equity in these accounts was used for trading. At
the end of March 2007, Olint withdrew the bulk of the funds from these three accounts in
amounts ranging from about $938,000 to over $1.7 million.
ANSWER: Respondents admit that OlinfTCI's Account No. 100544 and Account
No. 100543 had deposits ranging from $500,000 to $2 million, and tbat the deposits were
reflected transfer of funds from OlinrTCI's Account No. 100121, and that no other
deposits were made in those Account No. 100544 and Account No. 100543, and
Respondents lack knowledge or information sufficient to form a belief as to the truth of
the remaining allegations contained in the first sentence of Paragraph No. 20.
Respondents deny the allegations contained in the second sentence of Paragraph No. 20,
and state in the affirmative that all of the funds in Olint-TCI's accounts were at risk.
Respondents admit that OlintTCI withdrew $938,062 from Account No. 10053 on
March 30, 2007, after it had occurred nearly $62,000 in trading losses in that account,
that Olint-TCI withdrew $1,465,646.80 in Account No. 10544 on March 30, 2007 af\et it
suffered trading losses in excess of $34,000, and that Olint-TCI withdrew over
$16,600,147 and $4,000,000 on March 30,2007 and April 10,2007 respectively, after
Olint-TCI had incurred significant losses in its Account No. 100121, and closed out that
account on May 18, 2007, after it had incurred over $780,000 in trading losses in the
account.
TCI-FX Accounts
Paragraph No. 21, Two TCI accounts also showed suspicious activity similar to the Olint
accounts. For example, TCI made two deposits totaling over $40 million in one account and
withdrew about the same amount over the course of three transactions, even though no trading
activity ever occurred in this account. In the second account, TCI made an approximate $20
million deposit and withdrew about the same amount less than two weeks later, while making
only a small number of trades during this time.
ANSWER: Respondents deny the allegations contained in the first sentence of
Paragraph No. 21, and admit the remaining allegations contained in Paragraph No. 21
peftaining to TCI-FX Account Nos. 100262 and 100749. Respondents state in the
affirmative that approximately $ 1.1 million in funds were transferred from TCI-FX's
Account No.100262 to its Account No. 100749 between Januaty 2007 and March 2007,
at the direction of Smith, for the purpose of establishing an account to be managed by
Market Traders Institute, and that in March 2007 , 520,045 ,000 was transferred from TCI
-FX's Account No. 100749 to its Account No. 100262. In addition, Respondents state in
the affirmative that TCI-FX transferred $40,214,480.08 to JIJ Investments, Inc. ('JIJ') on
March 28, 2007, from funds that apparently originated, in parl, from TCI-FX's Account
No. 100749, and that on March 28,2007, OlinrTCI transferred $20,785,519.92 to JIJ,
and that a similar transfer occurred on April 10,2007 for $4,000,000, from funds that
apparently originated, in part, from Olint-TCI's Account No. 100121.
Paragraph No.22. TCI also had a third account at I-Trade, which it opened in June 2007,
after having withdrawn all the funds from its other two accounts just a few months before. TCI
deposited over $12 million into this new account, but very little trading activity occurred, and
TCI subsequently closed this account in February 2008.
ANSWER: Respondents admit that I-Trade held a third account for TCI-FX, Account
No. 11536, which was opened in June 2007. Respondents deny the allegations contained
in the second sentence of Paragraph No. 22, and state in the affirmative that the trading
that occurred in Account No. i 1536 was significant enough to cause nearly $1.2 million
in trading losses, and that Account No. 11536 was closed on February 20,2008'
Paragraph No.23. Between August 2006 to May 2007, Olint and TCI deposited almost $100
million into its trading accolrnts at I-Trade, but only a small percentage ofthese funds were used
for trading purposes. By May 2007, Olint and TCI had withdrawn the vast majority of the funds
from its I-Trade accounts. However, approximately $50 million of the funds which Olint and
TCI withdrew were sent to JIJ Investments ('JIJ'), a company owned by Martinez and his
brother and father, Jacob and Jared Marlinez.
ANSWER: Respondents deny the allegations contained in the first and second
sentence of Paragraph No. 23. Respondents admit that Olint-TCI and TCI-FX withdrew
approximately $20 million and $40 million from their respective accounts held by ITrade
and that on March 28, 2007 those entities wired those funds, in addition to
additional amounts in May 2007, to JIJ to allow JIJ to manage the investment of those
funds for those entities, and deny the remaining allegations contained in the last sentence
of Paragraph 23. Respondents state in the affirmative that JIJ was a subscriber owned
company and that Isaac Martinez's minority ownership interest was limited to $1,000 in
capital and that neither Jared Martinez nor Jacob Marlinez added to the company capital,
as ofthe end of March 2007.10
Paragraph No.24. I-Trade continually ignored the suspicious activity in the Olint and TCI
accounts, and even facilitated some ofthe unusual transactions in these accounts. For example,
on one occasion, approximately $3 million was wired lrom JIJ's bank account to a JIJ trading
account but instead deposited them into one of the TCI accounts controlled by Smith. A few
days later, I-Trade moved these funds from the TCI account to the JIJ account' Shortly
thereafter, JIJ withdrew these funds and sent them back to its bank account, without ever having
committed any of the funds to trading.
ANSWER: Respondents deny the allegations contained in the first sentence of
Paragraph No. 24. Respondents admit that on February 13, 2008, JIJ wired money to ITrade
for it to deposit in one of its accounts, and I-Trade mistakenly placed those funds
in TCI-FX's Account No.l1536, and that upon recognizing the error I-Trade adjusted
TCI-FX's account accordingly, and correctly placed the funds into JIJ's account, which
were subsequently withdrawn by JIJ, and Respondents deny the remaining ailegations
contained in Paragraph 24.
Loiten Accounts
Paragraph No.25, Another account at I-Trade which had suspicious activity was the account
of Ingrid Loiten ('Loiten'), which was opened in August 2006. Loiten's account opening
documents listed her annual income and net worth as between $25,000 and $50,000. Yet,
between December 2006 and March 2007, seventeen deposits were made to Loiten's account
totaling over $ L7 million.
ANSWER: Respondents admit that Loiten opened an account, account No. 181, in
August 2006 and listed on her account application that she had an annual income and net
worth of between $25,000 and $50,000, and deny the remaining allegations contained in
the first and second sentences of Paragraph No. 25, and Respondents state in the
affirmative that Loiten amended her financial information previously provided to I-Trade,
and that the amended financiaL information reflected an annual income of between
$ 100,000 to $249,000 and an increase in net worth. Respondents admit that Loiten made
over $1.7 million in deposits between December 2006 and March 2007, and those
deposits were made, for the most part, to cover trading losses, and Loiten explained to Il1
Trade that her net worth also included the value of her educational website business.
Respondents state in the affirmative that over 94%o of the funds deposited by Loiten were
lost tradins.
Paragraph No. 26(a). I-Trade's records included an April 17,2007 e-mail from Jared
Martinez to Martinez conceming a purported April 13 meeting with Loiten, during which she
supposedly told Jared Martinez that she owned and operated a multi-million dollar website,
www.homeworkjamaica.com, and wished to deposit between $2 and $5 million of her personal
funds into her trading account. Despite the discrepancy between Loiten's account application
and her purported verbal representation of Jared Martinez in April conceming her financial
information, I-Trade waited almost two months to obtain updated information from Loiten, even
though it accepted an additional $2.7 million in deposits during that same time.
ANSWER: Respondents admit the allegations coniained in the first sentence of
Paragraph No. 36(a). Respondents deny that l-Trade accepted $2.7 million in deposits
from Loiten between the opening of her account and April 1.7,2007, and that there was
any discrepancy between her account application and her verbal representation that rose
to the level to cause I-Trade to have any suspicion that her deposits were indicative of
money laundering, and Respondents state in the affirmative that Loiten's deposits were
made, for the most part, to cover trading losses in her account.
Paragraph No. 26(b). Not only was the size and frequency of the deposits in Loiten's
account inconsistent with her stated annual income and net worth in her account application, but
the wire activity in her account was also highly unusual. For example, Loiten opened her
account in August 2006 q'ith a $500 deposit and, over the succeeding three months, made four
subsequent wire deposits averaging less than $2,000. However, beginning at the end of
December 2006, the wire deposits changed dramatically in size and frequency. During the first
three months of 2007 , Loiten made multiple wire deposits (e.g. five to six per month) in amounts
averaging over $ 100,000 each
ANSWER: Respondents admit that some of the deposits made by Loiten were larger
than the net worth represented by Loiten in her initial account application, which was
later amended, and deny the remaining allegations contained in the first sentence of
Paragraph No. 26(b). Respondents admit the allegations contained in the seoond sentence
of Paragraph 26(b). Respondents admit that starting on December 20,2006, Loiten's
deposits in her account increased from her deposits made prior to December 20,2006,
and deny the remaining allegations contained in the third sentence of Paragraph No.
26(b). Respondents deny the allegations contained in the fourlh sentence of Paragraph
No. 26(b), and state in the affirrnative that, for the most part, Loiten's deposits merely
covered her trading losses.
Harris Account
Paragraph No. 27. Suspicious activity also occurred in the I-Trade account of Gareth Hanis
('Harris'). Harris opened an I-Trade account in December 2006 and, in his account opening
documents, he indicated that he had an annual income and net wofth of less than $25,000. Harris
initially deposited approximately $2,000 in his account. Over the succeeding three and a half
months, he made several more deposits averaging about $1,700 each. However, this pattem
dramatically changed in mid-April 2007, when deposits significantly increased in size. For
example, in May 2007, Harris deposited approximately $100,000 in his trading account and, in
October 2007, he made two more deposits in his account totaling almost $10 million.
ANSWER: Respondents deny the allegations contained in the first sentence of
Paragraph No. 27. Respondents admit that Harris opened his account in December 2006
and that in his initial account documents he indicated that his annual income and net
wofth was less than $25.000. and that document was amended in 2007 to reflect an
annual income and net worth in excess of $1,000,000 each, and Respondents deny the
remaining allegations contained in the second sentence of Paragraph No. 27.
Respondents admit that Harris made an initial deposit in his trading account of $2,050
followed by several additional deposits between January 1, 2007 and Aptll 15,2007
averaging over $1,800, and Respondents deny the remaining allegations contained in the
third sentence of Paragraph No. 27. Respondents admit that Harris deposited $30,065 in
his account on April 19, 2007 , and two deposits in May 2007 totaling approximately
$90,000, and deny that Harris's deposits reflected any pattern. Respondents admit that
Haris made two additional deposits in October 2007 of approximately five million
13
dollars each. Respondents state in the affirmative that Harris sustained trading losses tn
his account in excess of 9.5 million dollars, which was equivalent to over 940% of the
deposits made in the account.
Paragraph No.28. Despite the highly suspicious activity in the Olint and TCI accounts and
the Harris account, as alleged above, at no time did I-Trade file a SAR for any ofthese accounts
contrary to the requirements of NFA Compliance Rule 2-9(c), the Notice, and I-Trade's own
AML program.
ANSWER: Respondents are barred by federal regulations from disclosing to the
subject of a SAR that a SAR had been filed against the customer, and because this
Answer will be publicly disclosed by the NFA on its website, the Respondents
respectfully decline to admit or deny the allegation in Paragraph 28, and are prevented
from asserting affirmative statements in their defense, and respectfully suggest that
NFA's publication of its Complaint in this matter may have been in violation of the
confidentially provisions ofthe applicable federal law.
Paragraph No.29. I-Trade did file a SAR for the Loiten account but only after it received
information in March 2008 that Zambian authorities had arrested Loiten for alleged money
laundering. However, I-Trade never filed a SAR for the suspicious activity that took place in
Loiten's account between December 2006 and June 2007.
ANSWER: Respondents are baned by federal regulations from disclosing to the
subject of a SAR that a SAR had been filed against the customer, and because this
Answer will be publicly disclosed by the NFA on its website, the Respondents
respectfully decline to admit or deny the allegation in Paragraph 29, and are prevented
from asserting affirmative statements in their defense, and respectfully suggest that
NFA's publication of its Complaint in this matter may have been in violation of the
confidentially provisions ofthe applicable federal law.
Respondents state in the affirmative that standard AML procedures provided for
discretion by the reporting entity, depending upon the circumstances as a whole, in
choosing to file a SAR, that less tltan 4Yo of the deposits Loiten made in her account were
returned to Loiten, and the remaining deposits were consumed by trading losses.
Paragraph No.30. By reason of the foregoing acts and omissions, I-Trade is charged with
violations of NFA Compliance Rule 2-9(c).
ANSWER: Respondents admit that l-Trade has been charged with violations of NFA
Compliance Rule 2-9(c), and deny that the alleged acts and omissions contained in the
Complaint form a valid basis for such a charge.
Count II
Paragraph No.31. The allegations set forlh in paragraphs 1,2 and 13 me realleged as
paragraph 32 .
ANSWER: Respondenls incorporate and reallege their answers to Paragraphs Nos. 1,
2, and 13 above as their answer to this Paragraph No. 31.
Paragraph No. 32. The diligent supervision of employees and agents in the conduct of their
forex activities for or on behalf of an FDM requires, in part, that FDMs and their Associates who
have supervisory duties diligently exercise those duties to ensue the FDM complies with all
NFA Requirements.
ANSWER: Respondents admit the allegations contained in Paragraph No. 32 to the
extent that an FDM Associate's duties are limited to the scope of the duties assigned to
them by the FDM, and, as an example, where those duties include the duties of an AML
compliance officer those duties would include the duties of an AML compliance officer
as set forth under NFA regulations.
Paragraph No.33. The allegations set forth in paragraphs 15 through 30 are realleged as
paragraph 34 [sic].
ANSWER: Respondents incorporate and reallege their answers to Paragraphs Nos. 15
through 30 above as their answer to this Paragraph No. 33.
l5
Paragraph No.34. Martinez, as I-Trade's president, was responsible for the firm's overall
operations and rvas the firm's AML compliance officer responsible for overseeing the firm's
AML policy, which included filing SARs. Martinez was also the point person at I-Trade who
responded to NFA's AML inquiries, and he continued these duties for a period of time even after
the firm hired Estrada as its AML compliance officer.
ANSWER: Respondents admit that until October 31, 2001 , Martinez was the
designated AML compliance olficer for I-Trade, deny that Estrada assumed the duties of
I-Trade's AML compliance officer immediately upon her employment by I-Trade and
admit the allegations contained in Paragraph No. 34 as they pertain to Martinez's duties
prior to October 31,2001 , and deny the remaining allegations contained in Paragraph 34.
Paragraph No. 35. I-Trade and Martinez failed to file SARs for, or otherwise report, the
highly suspicious activities, as alleged above, which occurred in the Olint and TCI accounts and
the Harris account - and also failed to file a timely SAR for, or otherwise report, the suspicious
activity which occurred in the Loiten account, and, thereby, completely disregarded their
obligations under NFA Compliance Rule 2-9 (c), the Notice, and the firm's own AML
procedures.
ANSWER: Respondents are barred by federal regulations from disclosing to the
subject of a SAR that a SAR had been hled against the customer, and because this
Answer will be publicly disclosed by the NFA on its website, the Respondents
respectfully decline to admit or deny the allegation in Paragraph 35, and are prevented
from asserting affirmative statements in their defense, and respectfully suggest that
NFA's publication of its Complaint in this matter may have been in violation of the
confidentially provisions of the applicable federal law.
Paragraph No.36. At some point after Estrada was hired, I-Trade began filing SARs for
suspicious activity noted in customer accounts. However, the activity reported in those SARs
paled in comparison to the suspicious activity that went unreported relative to the Olint and TCI
accounts and the Harris and Loiten accounts. For example, I-Trade filed a SAR for a customer
who deposited $10,000 in an account and withdrew the funds several months later without ever
trading. Similarly, I-Trade filed SARs for two other customers who each deposited $5,000 and
then withdrew the funds a month or two later without conducting any trading' The activity
reported in these SARs was lar less suspicious than the suspicious activity which went
unreported in the Olint, TCI-FX, Harris and Loiten accounts.
16
ANSWER: Respondents are barred by federal regulations from disclosing to the
subjeot of a SAR that a SAR had been filed against the that customer, and because this
Answer will be publicly disclosed by the NFA on its website, the Respondents
respectfully decline to admit or deny the allegation in Paragraph 36, and are prevented
fiom asserting affirmative statements in their def'ense, and respectfully suggest that
NFA's publication of its Complaint in this matter may have been in violation of the
confidentially provisions of the applicable federal law.
Paragraph No.37. By reason of the foregoing acts and omissions, I-Trade and Martinez are
charged with violations oiNFA Compliance Rule 2-36(e).
ANSWER: Respondents admit that they have been charged with violations of NFA
Compliance Rule 2-36(e), and deny that the alleged acts and omissions contained in the
Complaint form a valid basis for such a charge.
Respectfully submitted,
I Trade FX LLC and
Isaac Martinez
of Their Attorneys
Robert B. Christie
Henderson & Lyman
175 West Jackson, Suite 240
Chicago, Illinois 60604
312-986-6957
rchristie(0henclerson-l vman. com
I7
To:
CERTIFICATE OF SERVICE
National Futures Association
Le gal Department-Docketing
300 South Riverside Plaza, Suite 1800
Chicago, Illinois 60606
Under penalties as provided by law, I certify that I served a copy of Respondents'
Answer do the department listed above at the address stated by messenger service from our
offices at 175 West Jackson Street, Chicago, Illinois on August 14,2008.
Robert B. Christie
Henderson & Lyman
175 West Jackson, Suite 240
Chicago, Illinois 60604
312-986-6957
rchristie@henderson-lyrnan.com |
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Francesc | 2008-08-19 17:58:05 |
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Francesc | 2008-08-19 17:56:02 |
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I Trade FX LLC denies allegations of failure to implement an adequate anti-money laundering program
Hi everyone
As you already know a former FXstreet's client I Trade FX LLC has an open case with the NFA charged with failure to implement an adequate anti-money laundering program, and also charged I Trade and the firm's president Mr. Isaac Martinez with failure to supervise.
On August 14, 2008, I Trade and Martinez filed an Answer to the Complaint in which they denied the material allegations contained therein.
To view I Trade FX LLC answer, click here
To view I Trade FX LLC case summary, click here
Stay tunned for new developments
Francesc |
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here is another new article: investforlife.wordpress.com/2008/07/04/olint-reponse-hollow/
This is a marsh folks. And it is stinking! Why doesnt anyone ask where they get their profits from when they dont trade?
Are intelligent people so rare on this planet? Greed always eats brain. And there is a lot of greed. Profit does not fall out of the sky. Its hard work to trade profitable in Forex. Seems to be much easier to catch the greedy people who have eaten their brain. |
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