For Release: June 27, 2006
Federal Court Issues Final Judgment in Trial of Fraud Action Brought by U.S. Commodity Futures Trading Commission
Gibraltar Monetary Corporation, Inc. and Employees Jayson Kline, Charles Fremer and Edward Johnson Ordered to Pay Over $2.7 Million to 253 Foreign Currency (Forex) Options Customers
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today that on May 30, 2006, the Honorable U.S. District Court Judge William P. Dimitrouleas of the U.S. District Court for the Southern District of Florida issued a final judgment against Gibraltar Monetary Corporation (Gibraltar), a Florida corporation, and three employees for defrauding the company’s foreign currency options customers. The employees found liable for violating federal commodity laws are Gibraltar President Jayson Kline of Boca Raton, Florida; Vice President Charles Fremer of Coral Springs, Florida; and senior account executive Edward Johnson of Wellington, Florida. This order follows an eight-day non-jury trial on a complaint the CFTC filed on February 10, 2004 (see CFTC News Release 4892-04, February 11, 2004).
The complaint alleged that beginning in May 2002, Gibraltar, Kline, Fremer, Johnson, and Gibraltar’s compliance manager Thomas Clancey, of Sunrise, Florida, fraudulently solicited members of the retail public to trade foreign currency options through Forex Capital Markets, LLC (FXCM), a New York-based foreign currency dealer. The complaint also alleged that Gibraltar failed to disclose that Kline had previously been enjoined by a federal court from committing solicitation fraud in connection with commodity options, and that the CFTC had issued a cease and desist order against Kline, also prohibiting him from committing options fraud (CFTC Docket No.94-8, December 9, 1993). Prior to trial, Clancy entered into a settlement agreement with the CFTC and testified on behalf of the CFTC at trial. FXCM, which was charged in the complaint with liability as a principal for the acts of Gibraltar, denied the allegations of the complaint and defended itself at trial.
The order entered by Judge Dimitrouleas finds that Gibraltar and its employees repeatedly made fraudulent misrepresentations and misleading statements to persons they solicited about the likelihood of profiting from trading foreign currency options, while failing to disclose that the vast majority of Gibraltar’s customers were losing money. Indeed, the court noted that nearly 95% of Gibraltar’s customers lost most, if not all, of their investments. The order also finds that Kline, in his capacity as a controlling person of Gibraltar, violated the terms of the CFTC’s December 9, 1993, cease and desist order. Judge Dimitrouleas ordered Kline, Fremer, and Johnson to repay $2,752,337.50 to Gibraltar’s customers, and imposed a total of $783,378 in civil penalties against the three individual defendants. The order also permanently prohibits Kline, Fremer, and Johnson from engaging in any commodity-related activity in the future.
According to the complaint, approximately $3 million of Gibraltar’s customer funds were deposited and traded at FXCM. The complaint alleged that through an exclusive introducing brokerage business relationship in which Gibraltar acted as FXCM’s agent, FXCM paid Gibraltar over $800,000 in commissions in connection with the customers’ accounts Gibraltar introduced. However, Judge Dimitrouleas found FXCM not liable as a principal for Gibraltar’s misrepresentations, misleading statements, or deceptive omissions.
The CFTC and the individual defendants have until July 31, 2006, to file a notice an appeal to the U.S. Circuit Court of Appeals for the Eleventh Circuit from any aspects of the May 30, 2006, final judgment entered by the district court.
The following CFTC Division of Enforcement staff members are responsible for this case: Rocell Cyrus, Mary Beth Spear, Ava M. Gould, Venice Bickham, and Rosemary Hollinger.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious Internet websites.
In addition, the CFTC publishes a series of Consumer Advisories at alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.
Last Updated: December 26, 2017