NFA Forex Dealer Dead Pool

[forex scholar]

So imagine one fine morning you wake up feeling bright and chipper. You have your morning coffee and scrambled eggs while listening to the banality of the local weather report. You look across the tv screen and see the currency rates scroll by. Hmmm, time to log into your currency trading account to see how your positions look. You are still long USD/JPY where you are taking a beating, hoping the pair will make a come back. In the meantime at least you can console yourself with the interest rate yield you’re getting.

But not anymore. Because if you’re a customer of E-FX Options you are spitting out your coffee at your computer screen right about now. Why? Because without almost any notice E-FX is closing its doors and liquidating all customer positions in two weeks.

Now had you been reading Forex Scholar’s reports all along and taken him seriously you could have closed your account months ago knowing E-FX was a poorly capitalized firm that was well below the coming $5 million capital requirement. But for those poor sods stuck in positions at this doomed firm you are about to get the margin call from hell. Meanwhile, the rest of E-FX’s customers can expect the worst trade execution imaginable from a firm about to slip beneath the waves. Run Forrest, Ruuuuuuuuun!

Dear Customer,

We regret to inform you that due to the restructuring of E-FX Options, LLC (“E-FX”), that the trading platform will cease service on 30 November 2007. Arrangements are further explained as follows:

Effective 30 November 2007 at 5:00 pm US Eastern Standard Time (1 December 6:00am Peking Time), E-FX will no longer be the counterparty to customer positions and will not service customer accounts.

All open positions will be liquidated at the closing price on that day and subsequently, the account will be closed. You may also liquidate your positions at any time on or before the close of 30 November 2007 via the platform, at a price for which you find suitable.

Fund withdrawal instructions may be provided to E-FX via the trading platform or by completing the Withdrawal Form on the firm web Site http://www.efxo.com/html/download/e/withdrawal.pdf

In the event that E-FX does not receive withdrawal instructions by December 1st, we will automatically deposit the remaining balance of your funds to the bank account registered with the company in your new account application. If E-FX does not have bank instructions as of 30 November, our customer service department will contact you.

For inquiries, please do not hesitate to contact our customer service manager Joey To at the hotlines listed below.

Lastly, account statements will remain available on the trading platform through 9 December 2007.

We apologize for any inconvenience brought about by the above arrangements!

Yours truly,
E-FX Options, LLC

I like how they "apologize" for any inconvenience. These firms are so irresponsible it spins the head. This firm knew months ago they were not going to be able to make the $5 million requirement and yet they didn't make the slightest effort to warn their customers ahead of time. They just wanted to milk the cow until the very last moment. Well, the cow is being taken to the slaughterhouse and its E-FX's customers that are about to become hamburger meat.

[forex scholar]

And the hits just keep on coming for One World Capital. The NFA just announced that One World has been fined $100,000 for the complaint brought against them last spring.
BASIC Case Summary

For a firm already struggling to meet the coming $5 million capital requirement that’s another 100 grand the firm will have to cough up.

Here is a summary of the NFA’s original complaint:

On June 4, 2007, NFA issued a Complaint charging One World with failing to maintain required books and records, failing to meet its minimum adjusted net capital requirement, and failing to notify NFA that its books and records were not current. The Complaint also charged One World with using misleading promotional material and failing to adopt and enforce written procedures to supervise its associates and employees in the use of promotional material. Finally, the Complaint charged One World and Walsh with providing false and misleading information to NFA.

This was the NFA’s official decision in the One World Case:

On November 14, 2007, One World was ordered to pay a $100,000 fine and pay an additional fine of $50,000 unless certain conditions are met. Walsh was ordered to guarantee payment of the fines, in the event that One World fails to pay them.

The settlement of the case and the Decision does not relieve One World of its obligation to comply with all NFA Requirements, including capital requirements for FDMs and the increased capital requirements for FDMs which go into effect on December 21, 2007.

I like that comment at the end, “the Decision does not relieve One World of its obligation to comply with all NFA Requirements, including capital requirements for FDMs and the increased capital requirements for FDMs which go into effect on December 21, 2007.”

Hmm, seems to me like the NFA is worried that One World isn’t going to be able to make the new requirement. Hence this gentle reminder along with the demand Walsh pay up for One World should One World default on its payment!

In any case, I strongly recommend ANYONE who has an account with One World for the love of criminy get your money out of that firm once and for all- if you even still can…

[forex scholar]

Three Jeers for Switzerland! Over the past year I have been documenting the sad collapse of Tradex Swiss AG. Tradex is one of the many unregulated firms that Switzerland allows to operate inside their borders without any serious oversight. When customers get burned Swiss Government officials are only too glad to sit on their hands, or in the case of Tradex, make the situation worse.

Example, customers at Tradex have been begging and pleading with Swiss authorities to grant Tradex the authority to release their funds, which they have inexplicably frozen with nary an explanation. After months of stonewalling Swiss Authorities have apparently informed the clients of Tradex that Tradex is now going into bankruptcy!

Tradex Swiss AG - Page 5

The regulatory environment in Switzerland is a complete shambles. As such fx traders should avoid Swiss firms at all costs. The following Swiss firms are completely unregulated and by trading with these firms you risk suffering the same fate as has befallen the customers at Tradex Swiss AG. I repeat, YOU HAVE NO PROTECTIONS if you open an account with an unregulated Swiss firm.

Unregulated Swiss Brokers
Finex
Tradex Swiss AG
WestCapFX
ACM
MIG
DukasCopy
GFX Group (Forex.CH)
Crown Forex

Do not trade with these firms if you care about safety of funds. Here is an article from the Boston Business Review reporting on the latest from Tradex Swiss AG:

Troubled Tradex may be forced into bankruptcy - Boston Business Journal:

Troubled Tradex may be forced into bankruptcy
Boston Business Journal - by Jackie Noblett Journal staff

Investigators for the Swiss Federal Banking Commission have recommended the Swiss government place Tradex Swiss AG, a foreign exchange trading shop operating out of Boston, into bankruptcy, according to a report and sworn statements filed in Suffolk Superior Court.

The specter of bankruptcy places into jeopardy a suit by dozens of Massachusetts Tradex investors that would ensure their funds are returned in full before other investors and creditors divide the company's assets. There are roughly 1,600 investors in 60 countries who have alleged claims to Tradex funds, according to court records.

The report was filed Oct. 25 in response to an order by Superior Court Justice Allan van Gestel as part of a legal battle over Tradex funds frozen in two Boston banks. Portions of the report translated from German to English state that "the Tradex group is very likely overindebted, and in any event, insolvent and therefore not fully able to fully meet its presumed obligations in a timely manner."

Swiss investigators Peter Lutz and Romeo DaRugna state in the report that customers of Tradex claim at least $15.3 million in receivables, of which $5 million have been claimed in U.S. courts. The investigation further concludes Tradex's assets are only $7.1 million, with $5 million frozen in a Boston branch of Bank of America account and $500,000 held by Sovereign Bank.

The SFBC was scheduled to meet Wednesday or Thursday to discuss the future of Tradex Swiss AG and its sister company, Swiss Garant. An affidavit by Lutz states "it is my sincere belief that the SFBC will order the liquidation and bankruptcy of Tradex at its Oct. 31/Nov. 1 meeting."

A spokesman for the SFBC said that as of press time, the court had not made a ruling on the future of the two companies.

As reported previously, Tradex is being investigated in Massachusetts for allegations that it was not properly registered in the state, according to the office of Secretary of State William F. Galvin. Most recently, Tradex investors have written letters to Attorney General Martha Coakley seeking assistance retrieving their funds.

If the Swiss government places Tradex into bankruptcy, which would be domesticated in U.S. Bankruptcy Court in Massachusetts, the cases filed in Suffolk Superior Court by former Tradex employees and investors attempting to recoup their funds would be nullified, and investors would have to file claims in bankruptcy court, said Liam Floyd, a lawyer for former Tradex manager Craig Karlis, who is suing Tradex for back pay.

But Floyd said he is not confident in the figures provided by the Swiss investigators, who he says have not done due diligence in securing Tradex's files and trading platform.

In a letter dated Oct. 23 to the SFBC, Nicolaas Jansen van Rensberg, a Tradex owner and executive stripped of powers as Swiss investigators took over the company, says that the report by Lutz and DaRugna contains "massive calculation errors, completely ... inappropriate methods of calculation, baseless and inflammatory accusations, libelous slander, suppositions based on total negligent and wholly inadequate methods of investigation."

Evan Fray-Witzer, attorney for Lutz and DaRugna, did not return calls. Meanwhile, Tradex's investors say they are becoming increasingly frustrated with the lack of communication and are taking matters into their own hands.
"Personally, I don't know what's going on," said Jenny Zhan, a trader who is not a part of any investor suits. "Even people with attorney, they don't know."

Zhan said the group is split on whether to wait out the current legal battle or to take further action.

[scorpion]

What's so good about RefcoFX which was regulated by NFA and went bankrupt with their traders' money?

NFA is again a joke. The regulation part they are doing is ensuring that money flows to them smoothly. I would like to see the best research data that shows NFA is helping traders. I think there's none.

[forex scholar]

Originally Posted by scorpion

What's so good about RefcoFX which was regulated by NFA and went bankrupt with their traders' money?

NFA is again a joke. The regulation part they are doing is ensuring that money flows to them smoothly. I would like to see the best research data that shows NFA is helping traders. I think there's none.

Ah but see that is the point Scorpion. RefcoFX was never regulated, just like all these swiss brokers. But Refco futures was regulated, which is why the NFA and CFTC stepped in to make sure client funds were safe.

[forex scholar]

Bad News for the folks over at Easy Forex. Not only are they below the $5 million capital requirement about to go into effect but now they are being sued by an angry customer who lost their shirt.

Of course, lawsuits from failed traders against forex brokers are a dime a dozen. But this case does not appear to be your ordinary frivolous lawsuit filed by some crank on a vendetta. Here are the details as reported in a major Israeli newspaper:
Globes Online – Israel business news – Israel economy – Israel banks – Tel Aviv Stock Exchange – Israel stocks - Shekel – Israel technology – Israel real estate – Israel defense companies - Globes [online] - Suit alleges Easy Forex rewards brokers fo

Suit alleges Easy Forex rewards brokers for client losses
Easy Forex: The plaintiff is a client who lost heavily; we don't want to judge him harshly.

Globes correspondent 19 Nov 07 09:55

A lawsuit has been filed against online foreign currency brokerage Easy Forex by one of its customers, alleging that the company paid its brokers incentives when investors lost money and fined them if they made a profit.

Easy Forex said in response that the customer had lost heavily, and it did not want to judge him harshly. It added that as part of its compliance with international standards, it warns customers, both orally and in its literature, of the risks inherent in foreign currency trading.

"All the allegations will be clarified in court," it said.

The claim followed a report on Channel 10 in which an Easy Forex broker was heard saying, "I had this evil grin on my face one day, when a client lost $35,000 in a quarter of an hour. A guy gets wiped out - I get my commission. A guy comes up a winner and turns a profit - I pay."

What jumps out is the line from the Easy Forex broker who brags on television to a news reporter that "a guy gets wiped out - I get my commission. A guy comes up a winner and turns a profit - I pay." I have heard of market makers running amok and giving customers bad order execution for their own benefit but I have never heard of an introducing broker getting compensated only when their customers lose.

So I did some digging to try and find this video. Here it is in all its glory:
ðòðò 10 - çãùåú - ëúá úáéòä çîåø ðâã çáøú ääù÷òåú "àéæé ôåø÷ñ"

Unfortunately, you need to speak Hebrew, which most of us don't. But a friend translated for me and the gist of the interview is that Easy Forex actually compensates these brokers everytime their customers LOSE money. Talk about being underhanded. Aren't introducing brokers usually compensated with a portion of the spread? Not here. Apparently these brokers would go into the religious community where the regulatory oversight is scant and get these guys to open accounts knowing they would get creamed.

Looks like all those critics of market makers have some new ammunition to fire away with in the great ECN vs. Market Maker debate.

By the way, beware forex brokers with evil grins...

[forex scholar]

A few months ago PFG announced that it had purchased American National Trading Corporation.

PFGBEST.com - Press Room
However, that hasn't stopped the NFA from rubbing out its former executives in a ruling that has banished several former principals of ANTC to the futures equivalent of Siberia. Did PFG buy a pig in the poke?

Here is the NFA's decision:
BASIC Case Summary

On November 29, 2007, ANTC was permanently barred from NFA membership and from acting as a principal of an NFA Member. Varden was ordered to pay a $40,000 fine and Zummo and Roy were ordered to each pay a $20,000 fine. Varden and Zummo were each barred from acting as a principal of an NFA Member until May 11, 2009. If, after May 11, 2009, Varden or Zummo becomes a principal of an NFA Member, then during the time he is a principal of such Member, he will cause such Member to be subject to the enhanced supervisory requirements of NFA Compliance Rule 2-9. After a Member, of which Varden and/or Zummo is a principal, has been subject to the enhanced supervisory requirements of NFA Compliance Rule 2-9 for at least 18 months, then Varden and/or Zummo will be permitted to make an application with NFA's Waiver Committee for a waiver of the enhanced supervisory requirements with respect to such Member.

What did they do? They were charged with "deceptive, misleading and high-pressure sales tactics." And "poor supervision." Eh, what else is new. Poorly capitalized firms that do a poor job supervising their employees are a dime a dozen as Easy Forex so amply demonstrated. Just more evidence for traders to beware poorly capitalized firms.

[forex scholar]

For months I have been detailing on this thread the agonies of Forex Dealer Dead Pool Member One World Capital and how this poorly capitalized firm was destined for the scrap heap. Earlier this year the NFA accused them of failing to meet basic financial requirements and hauled them before their business conduct committee. Later in the year One World's own traders began to howl in protest over the fact they couldn't withdraw their funds. Then their Chicago Sales staff resigned en masse. Then the NFA wacked One World with a huge six figure fine. Then last week I received another report that their New York Sales staff had resigned en masse.

And now the coup de grace. On Monday, December 3, 2007, the house of cards that was One World came crashing down after the NFA forced them to close their doors. This lame three legged horse was finally put down. One World is now grist for the knacker.

So what finally did in this rotting, fly covered firm? The sordid details can be read in the NFA's own Member Responsibility Action. It is quite instructive and as someone who has been warning traders for months to stay away from these guys; prophetic. The autopsy can be read here:
National Futures Association | News Center

Let's go through it bullet point by bullet point. The reason I wish to subject everyone to this painful tooth scraping is that the collapse of One World provides for a perfect illustration of why poorly capitalized firms are so risky to trade with. So open your mouth and prepare for some bleeding gums...

One World is required to maintain adjusted net capital in an amount of at least $1 million. The firm's latest form 1-FR-FCM reported that, as of October 31, 2007, the firm's total current assets were $2,387,427, its total liabilities were $1,160,200 and that its excess net capital was $227,227.

As I have been saying for months, firms that are barely meeting their capital requirement need to be closely scrutinized. One World was just barely hovering over the $1 million minimum capital requirement. In such examples the odds of a firm fudging their numbers dramatically increase .

Beginning on or about November 2, 2007, NFA began receiving complaints from One World forex customers who told NFA that they were experiencing difficulty in withdrawing funds from their One World trading accounts. For example, one customer told NFA that he had e-mailed a withdrawal form to One World on October 21, 2007. One World did not confirm receipt of the form until October 29th, when it represented that the customer would receive the requested funds within 48 hours. The customer complained to NFA that the funds had still not been provided to him by November 4th. Another customer complained to NFA that he had recently requested a withdrawal from One World in late October but had not received his funds. Both customers subsequently represented to NFA on November 30, 2007 that they still had not received their requested withdrawals.

According to the bulletin boards reports of One World not honoring customer withdrawals had been happening well before November. Not sure why NFA took so long to act on these reports. In any case, the fact that One World isn't honoring these requests as per the NFA is pretty depressing. And it indicates either One World has the most incompetent operations staff on earth, or their finances are a complete shambles.

During November, NFA made inquiry with Walsh regarding complaints from customers who reported that they were having difficulty withdrawing funds from One World. Walsh told NFA that he was investigating anti-money laundering concerns with regard to one of the customers and he failed to make any response to NFA's inquiry about a second customer's problems.

John Walsh has got some cojones I'll say that much. NFA confronts him about failing to give customers their money back and he just blows them off? If the CEO of a firm is so brazen with regulators how do you think his firm is going to treat its own customers?

But now we get to the really good stuff. One of my main arguments on this thread has been that poorly capitalized firms do not have the proper infrastructure to properly run a forex broker dealer. As such these brokers cut corners and keep the worst books imaginable. This is precisely what happened at One World Forex.

NFA asked Walsh to provide it with information as to the amount of One World's liabilities to customers who traded on Metatrader. He responded that Metatrader was very unreliable because it double counted and included demo accounts so it was not accurate. At first Walsh said that he did not know the amount of customer balances on Metatrader, but he later told investigators that the Metatrader balance was probably hundreds of thousands of dollars. He added that he did not know for sure and could not stand by that number. He told NFA that he would wait until the margin equity report was finished before giving NFA any numbers. NFA requested Walsh to provide the margin equity report from Metatrader and Walsh represented that it would take an hour to obtain.

However, after an hour had passed, Walsh told NFA that he had been interrupted and that it would take another couple of hours for him to get the margin equity report. To date, neither Walsh nor anyone else acting on behalf of One World have provided the required margin equity report to NFA despite several requests for the information.

WOW. NFA asks for a simple report on customer liabilities and Walsh can't produce it. Or more likely, WON'T produce it. What is Walsh covering up? My hunch is that his customer liabilities far exceed what he has in cash on hand. That could be the reason he hasn't turned over the requested bank statements NFA has been asking for as well. And what's the deal with Metatrader's "double counting" data? He honestly can't separate demo accounts from live accounts? I don't know much about Metatrader. But either it is the most rinky dink trading platform on the market or John Walsh is once again trying to slip the NFA a micky. In any case let's skip ahead to November 29th where we learn another juicy tidbit.

Investigators were unable to gain entry to the firm's office at first and called Walsh in that regard. He told NFA that the Metatrader platform had crashed overnight and that he was working at home and dealing with a number of customer calls. When Walsh arrived later that day, NFA investigators requested him to provide support for the November activity in One World's Bank of America accounts and Walsh responded that he did not have online access to all of One World's accounts.

There goes that rickety old Metatrader software again! How convenient that it "crashes" just when the NFA wants to look at the company's positions and net exposure. And I love how Walsh is now working from home to answer customer calls! He really is the last man standing at that firm. I wonder if Walsh is offering 24 hour support from his bed. I can picture him now, sitting there in his Homer Simpson tighty whities with one hand buried in a bag of doritos and another clinging to a cordless phone as Oliver Stone's "Wall Street" plays in the background...

Walsh: "thank you for calling One World Forex, John Walsh speaking, how can I help you?"
Customer: "ya the platform won't open, I'd like to go long two lots of USD/JPY."
Walsh: "oh i'm sorry, you're breaking up, [insert fake static sound]", click...

(next call)

Walsh: "thank you for calling One World Forex, John Walsh speaking, how can I help you?"
Customer: "I requested a withdrawal 7 weeks ago and I still haven't gotten my money! I want to speak to a manager!"
Walsh: "I'm sorry we have discovered that you were involved in money laundering. As a result we have had to confiscate your money. But don't worry. Jasmine Hotpants in Vegas put that money to good use." click...

And so on. But hey, I'm impressed he can even be bothered to pick up the phone to talk to customers after this "server crash."

The rest of the affidavit from the NFA auditor is full of evasions as Walsh and his cronies dodge and weave and do everything possible to prevent the NFA from finding out exactly how much money One World has in their bank accounts and what their customer liabilities are. It really is an amazing farce and frankly quite comical, but for the fact that many of One World's clients could be in serious financial jeopardy if it turns out that One World is in fact on the verge of bankruptcy.

The farce ends with the NFA's auditor standing outside One World's locked office last Friday morning, trying in vain to contact someone to let them in. But no one was around. Everyone at One World has abandoned ship. Here's hoping the customers will be able to make it to the lifeboats before this wreck settles to the bottom of the ocean. And so to John Walsh I sing you the love theme from Titanic...

"Heeeeeeeeeere, faaaaaaaaar, whereeeeeever you are..."

[forex scholar]

Yesterday the NFA took action against two more poorly capitalized broker dealers. Solid Gold and FXLQ. Solid Gold has been in the poor house a while but didn't FXLQ have a lot of capital? Nope. Turns out the $30 million + in excess net capital they claimed to have on deposit derived from a bond that in all likelihood never actually existed!

The feared meltdown of the poorly capitalized is happening right on schedule. I'll have more on these firms shortly. Also, the CFTC report is coming out this week. Stay tuned as a lot of stuff is happening right now in the U.S. forex retail market.

[forex scholar]

Of all the scandals I have reported on to date this one is by far the most disturbing. The main reason is because FXLQ appears to have defrauded, not just the trading public, but more importantly U.S. regulators. And did it in such a bold manner as to send chills down the spines of anyone concerned about due diligence.

Yesterday the NFA took a member responsibility action against Forex Liquidity that prevents them from accepting any new customers, distributing customer funds without their approval, and requires that FXLQ provide NFA with a full accounting of their financials, which they have been unwilling to do as of this date:
BASIC Case Summary

Why has the NFA taken this action? Let's go right to the source, the NFA auditor's own affidavit:

In August 2007, during an examination by NFA, NFA noted that FXLQ's June 30,2007, 1-FR-FCM listed as current assets securities with a market value of $35 million. FXLQ represented that this amount was solely attributable to a bond issued by ABN-AMRO. FXLQ further represented that this bond was being held at Malory Investments, a registered broker-dealer.

Ah yes, FXLQ reported adjusted net capital of $36 million on their last CFTC report. These guys have been telling regulators all year they have plenty of capital.

FXLQ has represented to NFA that it obtained the ABN-AMRO bond from its president and principal, Robert Gray, who in turn obtained it from a company called Swiss Imperial Trust A.G. in exchange for contractual services.

I'm curious to know what contractual services Robert Gray provided that earned him a $35 million bond? A quick search on the Internet shows Swiss Imperial does simple accounting work (Swiss Imperial Trust Ag - Zug, Switzerland | Company Profile). So why would a forex dealer be billing an accountant $35 milllion? Isn't it supposed to work the other way around?

On November 28, 2007, NFA received documents from the Financial Industry Regulatory Authority (Finra) (formerly NASD) evidencing that the ABN-AMRO bond and cash, which FXLQ represented were being held at Malory, were actually being held in Switzerland by Swiss Imperial in an account in the name of Malory. NFA has obtained information indicating that the owner of Swiss Imperial is also a part owner and principal of Malory.

Hmmm. This is interesting. So the bond and cash are not sitting in a brokerage account for FXLQ. The bond and cash are actually sitting in Switzerland at Swiss Imperial in an account marked "Malory?" Now that sounds very fishy indeed.

As it appeared that the ABN-AMRO bond had never left the possession of Swiss Imperial, and that the information provided by FXLQ regarding where the bond and other firm assets were being held were not accurate, NFA informed FXLQ that it did not exercise sufficient control over the bond and the cash held by Swiss Imperial to qualify them as current assets. Accordingly, on November 29, 2007, NFA directed FXLQ to cause all firm assets being held at Swiss Imperial to be transferred to a regulated United States financial institution by 5:00p.m. on Friday, November 30th, and provide evidence of such transfer.

No worries, Mr. Gray can just request the funds be transferred back to the U.S. to FXLQ's domestic bank/brokerage account right? Right? RIGHT?!!!

The same day that NFA directed FXLQ to execute the transfer described above, FXLQ represented that it was unaware that the ABN-AMRO bond and firm cash were being held at Swiss Imperial, FXLQ, however, represented that it had been working on transferring the ABN-AMRO bond and firm cash to a United States bank for approximately a week. When NFA asked for the name of the bank to which the assets were being transferred, Gray was unable to recall the full name of the bank, but indicated it included the word "Commonwealth" in its name.

You have got to be kidding me. Let's see, Robert Gray is transferring nearly $48 million in cash and securities and he "doesn't recall" the name of the bank the money is going to?! How can he sit there and tell the NFA that with a straight face? He probably wasn't. I can picture him now scrunched up in the corner of his office, shivering and biting his nails like a man about to be water boarded trying to tell the NFA anything if they'll just go away and let him get back to reaming traders unfortunate enough to sign up with him:
http://www.elitetrader.com/vb/showth...5753&highlight

On December 1, 2007, FXLQ sent e-mails to NFA in which it represented that the transfer had been effected from Swiss Imperial to "Commonwealth." FXLQ represented that the transfer only included cash, thereby suggesting that the ABN-AMRO bond had been liquidated.

On December 3rd, FXLQ represented to NFA that the transfer had been made to Commonwealth Financial Network, a registered broker-dealer, and provided NFA with an account number and CFN's web site address.

On December 4, 2007, NFA spoke with CFN and the firm represented that it did not have an account for FXLQ and that the account number that FXLQ provided to NFA was fictitious.

Is Robert Gray a complete idiot? Why the hell would you lie to the NFA and give them a fake account number KNOWING NFA is going to check to see if this account actually exists?

On December 4, 2007, FXLQ's General Counsel forwarded to NFA a letter from a firm identifying itself as "Commonwealth Financial P.M.S", which indicated that FXLQ c/o Robert Gray has funds in the amount of $47,800,000 on deposit in an account at Commonwealth Financial P.M.S. This letter contained CFN's website address. NFA subsequently spoke with CFN's chief compliance officer who indicated that Commonwealth Financial P.M.S. is not in any way affiliated with CFN. NFA staff then informed FXLQ's General Counsel that CFN has represented to NFA that it does not have an account for FXLQ, the account number provided to NFA was fictitious, and Commonwealth Financial P.M.S. is not in any way affiliated with CFN.

The Commonwealth Financial P.M.S. letter was purportedly signed by an individual named Tom Smith. NFA spoke with Tom Smith on December 4, 2007, who confirmed the contents of the letter and stated that Commonwealth Financial P.M.S. was a registered broker-dealer and provided NFA with the firm's purported CRD number. NFA then contacted FINRA and learned that the CRD number provided by Tom Smith was that of a former broker dealer that has not been registered since 1991. FINRA also confirmed that Commonwealth Financial P.M.S. is not currently a registered broker.

Why didn't Rob Gray just get on an airplane and fly out of the country? Why go through this farcical con job in light of the fact that a two year old could see through this BS? But no, Gray continues to spin like Larry Craig after getting caught with his pants down in a Minneapolis washroom.

On December 3rd, FXLQ also provided NFA with net capital computations that purported to show that, as of November 30, 2007, FXLQ is in capital compliance. One computation purported to show the assets that FXLQ claims are at "Commonwealth." A second computation purported to show that even if the assets that FXLQ claims are at "Commonwealth" are non-current assets the firm would be in capital compliance.

"non-current assets." How about "never-were assets." It looks like FXLQ created this bond out of thin air to fatten up their balance sheet. What's the matter FXLQ? Are you ashamed to be a poorly capitalized firm?

FXLQ's October 31, 2007, Form 1-FR-FCM included a liability of accounts payable and accrued expenses of approximately $10 million, which was not included, however, in either of FXLQ's November 30th net capital calculations. On December 3, 2007, NFA requested that FXLQ provide evidence that the accounts payable and accrued expenses listed on its October 31, 2007, 1-FR-FCM had been paid.

Both of FXLQ's November 30th calculations also indicated that over $11.2 million of FXLQ's assets are being held at Malory. FINRA has advised NFA, however, that is has been unable to confirm that Malory's bank accounts have anything approaching this amount.

It's one thing to fib about your company assets. But are they doing this to cover up huge company losses which has left them $10 million in the hole? That of course is the nightmare scenario and could explain why Gray has been desperately trying to throw the NFA off his tracks.

On December 4, 2007, NFA directed FXLQ to transfer funds that it claims are at Malory to the firm's bank account at US Bank. Further, NFA again directed FXLQ to provide evidence that the accounts payable and accrued expenses listed on its October 31, 2007. NFA gave FXLQ until 3:00pm to comply with these directives and FXLQ failed to comply.

This case is pretty serious. And I wouldn't be surprised if the feds break down the door of FXLQ and raid the place. If this bond is fictitious that is the kind of fraud that gets you thrown in the slammer for a number of years. This isn't just a matter of having shoddy book keeping as we have seen with firms such as One World Capital or Concorde Financial. This sounds like gross fraud and if FXLQ is indeed in the hole to tune of $10 million a lot of people are gonna get hurt. It's time to come clean Mr. Gray. What the hell is going on at Forex Liquidity?