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GCI and Vazquez Illegally Offered Forex Investments on Website; CFTC Settlement Order Requires Them To Cease Forex Operations
The CFTC also today filed and simultaneously settled an administrative action against Global Capital Investment LLC (GCI) of New York, New York and Mitchell Vazquez of Wilton, Connecticut, finding that they had offered illegal forex futures and options contracts to retail investors. The CFTC order issued against GCI and Vazquez, president of GCI, finds that from late 1999 through at least October 2001, GCI and Vazquez sold illegal forex futures contracts to retail customers through a website. On that website, GCI stated that they transacted nearly $2 billion per month in “spot foreign exchange” and invited customers to trade through GCI’s Internet trading platform. Contrary to their claim, the order finds that they were offering forex futures contracts. The order also finds that from at least December 21, 2000 through March 2001, GCI and Vazquez also solicited customers to enter into illegal forex options transactions. According to the order, the forex futures and options transactions were consummated off-exchange, i.e., not on a contract market or a derivatives transaction execution facility, designated or registered by the CFTC. The order finds that GCI and another forex entity acted as the counterparties to the forex futures and options contracts with the retail investors but were not lawful counterparties under the Commodity Exchange Act, as amended by the CFMA.
The CFTC order requires GCI and Vazquez to cease and desist from further violations of the CEA and CFTC regulations, imposes a $100,000 civil monetary penalty and requires them to comply with undertakings. Among other things, they undertake not to seek or claim exemption from registration with the CFTC for five years, not to engage in forex futures and options business for or on behalf of U.S. customers or cleared or conducted in the U.S. for three years, and to cease all current foreign currency operations. GCI and Vazquez recently represented that they have ceased operations and returned all customer funds in accordance with the terms of the order. In settling the action, GCI and Vazquez neither admit nor deny the findings in the order.
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In each of the federal court actions, the CFTC is seeking permanent injunctive relief, restitution for customers, disgorgement of ill-gotten gains, and civil monetary penalties.