For Release: January 4, 2007
U.S. Commodity Futures Trading Commission Charges Stephanie Ann Gallitano and Her Companies, Financial Risk International, Inc. and Financial Risk Management, Inc., with Defrauding Customers Purchasing Foreign Currency (Forex) Options
Conduct Allegedly Resulted in Losses to Retail Customers of Over $3 Million
Washington, D.C.— The U.S. Commodity Futures Trading Commission (CFTC) announced today the recent unsealing of a complaint filed in the Southern District of Florida against Stephanie Ann Gallitano, of Plantation, Florida, and her companies Financial Risk International, Inc. (FRI) and Financial Risk Management, Inc. (FRM). FRI and FRM have a single office in Fort Lauderdale, Florida.
The CFTC’s complaint alleges fraud in connection with foreign currency (forex) options transactions. In particular, the complaint alleges that, between approximately March and June 2004, FRI employees, including Gallitano, have engaged in the fraudulent solicitation of at least 257 members of the retail public to open accounts and engage in speculative forex options trading at both registered and unregistered futures commission merchants.
Specifically, according to the complaint, FRI and Gallitano’s fraudulent sales pitches included false representations that large profits were likely or virtually guaranteed; that risks were minimal or could be substantially eliminated; that profit opportunities were only available if investments were made quickly; that previous FRI customers had made substantial profits and new customers could expect similar profits; that any previous losses could be recouped with additional investments; and that Gallitano was an expert in trading commodity options. In fact, as the complaint alleges, FRI customers sustained more than $3 million in losses during the relevant period.
While making these false representations, FRI and Gallitano failed to disclose material information, including the substantial risks associated with trading forex options; and FRI’s consistently losing trading track record, including that nearly 100% of FRI’s customers lost money during the relevant period, according the complaint.
The complaint also alleges that FRI is liable as principal for the fraud violations of its employees, Gallitano is liable for FRI’s fraud as controlling person of the firm, and both Gallitano and FRM aided and abetted FRI’s commission of fraud.
Court Freezes Defendants’ Assets
On December 4, 2006, the Honorable Judge Joan A. Lenard of the United States District Court for the Southern District of Florida, Miami Division, issued a statutory restraining order freezing defendants’ assets and prohibiting the destruction of defendants’ books and records. The preliminary injunction hearing is scheduled for January 22, 2007.
In its ongoing litigation, the CFTC is seeking preliminary and permanent injunctive relief, repayment of customer losses, and payment of monetary penalties.
The following Division of Enforcement staff members are responsible for this case: Matthew Elkan Kathleen Banar, Lacey Dingman, Richard Glaser, and Richard Wagner.
Last Updated: July 30, 2007