WASHINGTON (HedgeWorld.com)–The Commodity Futures Trading Commission announced that last month Judge James V. Selna of the U.S. District Court for the Central District of California froze the assets of FX First Inc., a registered futures commission merchant, and the assets of two of its principals.
The CFTC’s announcement, Nov. 20, said that the court in mid-October enjoined all further violations of federal commodity law and prohibited destruction of the assets or records of the defendants: FX First, Newport Beach, Calif.; its secretary-treasurer, Alexey Mironov; and its president, William Whyte.
The defendants could not be reached for comment.
Judge Selna acted on a complaint filed by the CFTC Oct. 6, which alleged that FX First and Messrs. Mironov and White misappropriated almost US$2 million for the purpose of speculating on the value of foreign currency futures contracts. Defendants then refused the requests of at least 25 customers for the return of these funds.
The complaint further alleges that FX First failed to maintain the minimum amount of net assets required to operate as a futures commission merchant. CFTC regulations require a minimum adjusted net capital of US$250,000. As of Sept. 26, the actual net capital of FX First was less than that–indeed, it was negative: Liabilities exceeded assets by approximately US$1,670,000.
According to the complaint, Mr. Mironov is a signatory on the bank accounts of the corporation “and responsible for the day-to-day financial matters involving the corporation, including making decisions involving payments to customer and employees, disbursements and other matters relating to FX First’s finances.” Mr. Whyte is registered with the CFTC as an “associated person” and is “responsible for the day-to-day operations of the corporation such as hiring and firing of employees and the supervision and training of employees.” The complaint adds that the two men coordinate on financial matters.
The complaint alleges that FX First has misappropriated customer funds by their transfer to a foreign affiliate and their use to pay for miscellaneous business expenses.