Release Number 8799-23
Foreign Trading Platform Charged with Failure to Register and Supervise Its Anti-Money Laundering Procedures
September 29, 2023
Washington, D.C. – The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against Switzerland-based LYFE, S.A. as the successor in interest to Squared Financial Services Limited (SFSL), an Ireland-based entity that is no longer operational.
The order finds SFSL offered transactions in leveraged gold and silver and leveraged foreign currencies (forex) such as the Euro and Japanese Yen to prospective retail customers and commodity pools in the U.S. and accepted orders for, and funds to margin, these transactions without registering as a futures commission merchant (FCM). These actions are in violation of the Commodity Exchange Act (CEA) and the CFTC’s regulations. The order further finds SFSL did not conduct the metals transactions on a registered exchange and failed to supervise diligently its employees’ handling of these customers’ accounts because it did not implement adequate anti-money-laundering (AML) procedures.
The order requires LYFE to pay a $175,000 civil monetary penalty, disgorge $37,014.81 in profits from its unlawful activity, and cease and desist from any further violations, as charged. In the order, the CFTC recognizes that LYFE’s civil monetary penalty in this matter was substantially reduced in light of LYFE’s substantial cooperation.
“This case underscores our relentless efforts in holding firms—wherever located—accountable for entering our markets without authorization, and for stumbling in their critical AML responsibilities,” said Director of Enforcement Ian McGinley. “Firms entering our markets face a binary choice – play by the rules on a level playing field, or, face enforcement.”
According to the order, from November 2017 to January 2019, SFSL engaged in unlawful off-exchange transactions in forex and gold and silver with several U.S.-based commodity pools. SFSL unlawfully offered these transactions through its on-line trading platform and other means and did not conduct the metals transactions on a registered exchange. SFSL also operated as an FCM without being registered with the CFTC through its solicitation and acceptance of orders in forex and metals and acceptance of funds to margin such trades. Additionally, SFSL failed to supervise diligently its employees in implementing its AML and know-your-customer policy and procedures in handling the accounts of the pools, which were comprised of U.S. retail participants and operated and advised by an unregistered U.S. commodity pool operator (CPO) and commodity trading advisor (CTA).
Specifically, the order finds SFSL failed to determine whether the unregistered CPO and CTA were regulated or required to be registered with the CFTC despite clear indications they were acting in roles that were subject to regulation and required registration. In addition, SFSL allowed the CPO and CTA to open trading accounts on behalf of the pools using application forms titled, “Account Opening Application Unregulated Entity.” Further, SFSL did not flag or perform adequate due diligence when the CPO and CTA opened multiple additional accounts on behalf of existing and additional pools of U.S. retail participants even after the CPO and CTA had lost most of the funds invested. Finally, the order finds SFSL allowed the significant majority of accounts opened by the CPO and CTA to be introduced by an unregistered introducing broker who was affiliated with the CPO and CTA, and who had a history of forex-related registration and fraud violations.
The Division of Enforcement staff responsible for this matter are Harry E. Wedewer, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan.
The Division of Enforcement’s Bank Secrecy Act Task Force also provided assistance.
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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 Whistleblower Office. Whistleblowers may be 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.