Renewed Statement of Commitment to the FX Global Code

Foreign Exchange

(Originally published 4 April 2022)

The Federal Reserve Bank of New York (New York Fed) today released its renewed Statement of Commitment to the FX Global Code (Code). The Code, which was initially published May 2017, is a set of global principles of good practice in the foreign exchange market, developed to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. It was developed by a partnership between central banks and Market Participants from around the globe and most recently was updated in July 2021.

The New York Fed has reviewed the content of the updated Code and, in issuing this Statement of Commitment, has confirmed that it acts as a Market Participant as defined by the Code. The New York Fed is committed to conducting its foreign exchange market activities, when acting as a Market Participant, in a manner consistent with the principles of the Code.

The purpose of the Code is to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of Market Participants, supported by resilient infrastructure, are able to confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable standards of behavior. The Code is promoted, maintained and updated on a regular basis by the Global Foreign Exchange Committee (GFXC).

Source: Federal Reserve Bank of New York

NFA orders Connecticut-based Interactive Brokers LLC to pay a $250,000 fine

Regulatory and Legal News

April 14, Chicago—NFA has ordered Connecticut-based futures commission merchant and forex dealer Member Interactive Brokers LLC to pay a $250,000 fine.

The Decision, issued by NFA’s Business Conduct Committee (BCC), is based on a Complaint issued by the BCC and a settlement offer submitted by Interactive Brokers, in which the firm neither admitted nor denied the allegations in the Complaint. In its Complaint, the BCC alleged that Interactive Brokers canceled retail customer forex orders contrary to the reasons permitted under NFA Compliance Rule 2-43(a)(1) and failed to adequately supervise its employees in the conduct of their forex activities on behalf of the firm to ensure compliance with the relevant NFA requirements, contrary to NFA Compliance Rule 2-36(e). In its Decision, the BCC found that Interactive Brokers violated NFA Compliance Rules 2-43(a)(1) and 2-36(e).

The complete text of the Complaint and Decision can be viewed on NFA’s website.

Source: National Futures Association

CFTC Charges Wisconsin Woman and Her Companies with Fraud and Misappropriation

Enforcement and Legal Action

April 13, 2022

Washington, D.C. — The Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Eastern District of Wisconsin against Kay Yang of Mequon, Wisconsin, and her companies, AK Equity Group LLC and Xapphire LLC. The complaint charges Yang, AK Equity, and Xapphire with fraud and misappropriation related to an off-exchange foreign currency (forex) trading scheme in which they solicited funds totaling at least $15.7 million from at least 67 investors. Yang’s husband, Chao Yang, is named as a relief defendant for receiving investor funds to which he was not entitled. 

Case Background

According to the complaint, from approximately April 2017 through March 2020, the defendants solicited and pooled millions of dollars of investors’ funds in bank and trading accounts for the purported purpose of trading forex.

The complaint alleges, among other things, the defendants falsely represented to existing and potential pool participants that they successfully managed hundreds of millions of dollars in a variety of investment vehicles; consistently achieved positive monthly returns; would allocate 100% of pool participants’ funds to forex trading; and would adhere to a trading strategy that included low leverage ratios and moderate trading frequencies. These were false claims and the defendants routinely suffered trading losses using high leverage and high frequency trading strategies. The defendants also failed to disclose they misappropriated significant amounts of pool participants’ funds to pay for Kay Yang’s personal expenses. For example, Yang spent over $700,000 at casinos and on gambling-related purchases, more than $439,000 on travel and luxury hotels, and at least $248,000 on cars and car-related expenses. Furthermore, Yang made net transfers of approximately $200,000 to bank accounts in her name, at least $1.4 million to bank accounts in her husband’s name  and more than $1 million to joint bank accounts she shared with her husband.         

In continuing its litigation, the CFTC seeks full restitution to defrauded pool participants, disgorgement of any ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act, as charged.  

Related Civil Actions

In a separate, parallel matter, the Securities and Exchange Commission (SEC) today filed a civil complaint against Yang in connection with this scheme. 

On July 13, 2020, the State of Wisconsin Department of Financial Institutions, Division of Securities (WDFI), issued a Final Order by Consent to Cease and Desist, Revoking Exemptions, and Imposing Disgorgement, Restitution, and Civil Penalties on Yang in connection with her operation of AK Equity and Xapphire.

Source: Commodity Futures Trading Commission

Order, final judgment entered against Danish resident for forex fraud.

Regulatory News

April 08, 2022

Washington, D.C. — The Commodity Futures Trading Commission today announced the U.S. Court for the Southern District of New York entered an order and a final judgment against Danish resident Casper Mikkelsen, a/k/a Carsten Nielsen, a/k/a Brian Thomson, a/k/a Thomas Jensen, a/k/a Casper Muller, permanently prohibiting him from trading commodity interests, and ordering him to pay $1,191,286 in restitution and a $3,573,860 penalty, which is triple the profits Mikkelsen made committing this fraud.

“The CFTC will continue to partner with foreign regulators and other agencies to aggressively pursue individuals who use our markets to misappropriate funds from unsuspecting victims no matter where these individuals may reside,” said CFTC Acting Director of Enforcement Vincent McGonagle.

Case Background

The order and final judgment resolve a CFTC enforcement case filed on May 18, 2020. [See CFTC Press Release No. 8164-20

The order found that Casper Mikkelsen falsely promised clients he would use his discretion to trade forex on their behalf. In turn, his clients invested at least $1,536,782.47 with GNTFX. Rather than using those funds for forex trading as promised, Casper Mikkelsen misappropriated the funds. The order found that Mikkelsen used the clients’ funds for his own benefit and to pay certain clients purported forex trading profits as is typical in a Ponzi scheme. The order also found that Mikkelsen was required to register as a commodity trading advisor but was not registered.

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the assistance of the U.S. Customs and Border Protection, the Australian Securities and Investment Commission, International Financial Services Commission of Belize, British Virgin Islands Financial Services Commission, Cyprus Securities and Exchange Commission, Czech National Bank, Danish Financial Supervisory Authority, Central Bank of Ireland, Financial and Capital Market Commission of the Republic of Latvia, Securities Commission Malaysia, Ontario Securities Commission, Comissão do Mercado de Valores Mobiliários (the Portuguese Securities Market Commission), Monetary Authority of Singapore, and UK Financial Conduct Authority.

The Division of Enforcement staff responsible for this matter are Xavier Romeu-Matta, Judith M. Slowly, Christopher Giglio, James G. Wheaton, Steven I. Ringer, Lenel Hickson, Jr., and Manal M. Sultan.

* * * * * * *

CFTC’s Forex Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories and Articles, including the Foreign Currency Trading (Forex) Fraud Advisory, which provides information about a type of fraud involving the trading of foreign currencies and how customers can detect, avoid, and report these scams.

The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that company. A company’s registration status can be found using NFA BASIC.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.

Source: Commodity Futures Trading Commission

Interbank Market News Scan: Biden releases budget; inflation may not be that high next year; Nigeria’s central bank injects liquidity

Interbank, Pakistan, rupee. “The rupee reached a new record low on Monday, selling at 182.19 against the dollar in the interbank market, as political uncertainty triggered by a no-confidence move against Prime Minister Imran Khan weighed on sentiment, dealers said.” See article here. Source: The International News.

Interbank, Nigeria, naira, Access Bank. Similarly, (Access Bank) states that operating expenses at bank-level was up marginally by 2% year on year, showcasing the effectiveness of cost-cutting measures whilst also noting that FX rates on the Interbank market continued upward trend by 6% year on year to stand at N424 per dollar mainly driven by rate adjustments and lean supply. See article here. Source: Nairametrics.

Interbank, Pakistan, rupee. “The buying rate of 1 SAR to PKR was Rs 48.050 and the selling rate of 1 SAR to PKR was Rs 48.850 in the interbank market on Mar 28, 2022.” See article here. Source: BOL News.

Interbank, LIBOR, SOFR. “With a war waging in Central Europe, inflation at 50-year highs and the U.S. central bank looking to raise interest rates multiple times this year, you’d think that the average mortgage banker already has a pretty full plate. But add to the list of woes the Fed’s abortive transition from Libor to the Secured Overnight Financing Rate or SOFR and you have a recipe for disaster later this year.” — Christopher Whalen. See article here. Source: National Mortgage News.

Interbank, Nigeria, open market operations, naira. “In pursuant of its pro economic growth monetary policy the Central Bank of Nigeria, CBN, increased its net liquidity injection into the interbank money market by 110 per cent  to N770 billion in the first quarter of the year, Q1’22, from N367 billion in the fourth quarter of last year, Q4’21.” See article here. Source: Vanguard Nigeria.

Interbank, U.S., inflation, dollar. “Neuberger Berman expects extreme bond market volatility to stabilise and is counting on opportunities scooping up cheap high-yield and investment grade bonds in the telecom and energy sectors.” See article here. Source: Financial Review.

Interbank, U.S., budget, taxes. “Today, President Joe Biden released the FY2023 Budget to propose critical investments that will prioritize security at home and abroad, bolster the economy, promote health, tackle climate change, and further opportunity for all.” See article here. Source: U.S. Department of the Treasury.

Foreign exchange rates and dollar index as of 29 March 2022, 3:20 am GMT

Currency Pair28 March 202229 March 202230 March 202231 March 20221 April 2022
Dollar Index99.0099.04   
Sources: OANDA, MarketWatch

Foreign exchange rates as of 12:13 am AST. United States, Great Britain, Canada, China, Angola, Nigeria, Japan

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
Dollar Index98.4998.4698.7898.8498.52
Sources: OANDA, MarketWatch

Foreign exchange rates and dollar index as of 6:22 am AST

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
Dollar Index98.4998.4698.7898.84 
Sources: OANDA, MarketWatch

Interbank Market News Scan: Russia willing to sell oil to “unfriendly nations.”

Interbank, Russia, roubles, oil. “The Russian rouble briefly leapt to a three-week high past 95 against the dollar on Wednesday in Moscow, before settling close to 100, after President Vladimir Putin said Russia would start selling its gas to “unfriendly countries” in roubles.” See article here. Source: Reuters

Interbank, foreign exchange, Brazil. “Despite its history of extremely rigid and bureaucratic exchange rules, Brazil will now evolve towards a scenario of free movement of capital and simpler and less bureaucratic operations.” See article here. Source: Lexology

Interbank, foreign exchange. “When the U.S. central bank starts raising interest rates, emerging markets often begin to submerge again: Their borrowing costs rise, their currencies fall and, to add insult to injury, slower U.S. growth dents demand for their products. Will this time be the same as the era of zero interest rates ends?” See article here. Source: The Wall Street Journal

Interbank, foreign exchange, India. “The rupee pared initial gains to settle 14 paise lower at 76.32 (provisional) against the US dollar on Wednesday due to month-end dollar demand from importers and rising crude prices amid geopolitical uncertainties.” See article here. Source: Economic Times

Interbank, Russia. “Russia’s main stock market will resume trading Thursday for the first time in four weeks, the Central Bank announced Wednesday.” See article here. Source: The Moscow Times

Foreign exchange rates and dollar index as of 9:40 am AST

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
Dollar Index98.4998.4698.78  
Sources: OANDA, MarketWatch