For Release: March 27, 2007
U.S. Commodity Futures Trading Commission Files Action Against Futures Commission Merchant Forefront Investments Corporation d/b/a CFG Trader For Failure to Maintain the Minimum Amount of Net Capital Required by Federal Law
Defendant is Charged with Being Undercapitalized by More Than $2,200,000 and Recordkeeping Violations
Washington, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in the U.S. District Court for the Eastern District of Virginia against Forefront Investments Corporation (Forefront) of Richmond, Virginia, a Futures Commission Merchant (FCM) registered with the CFTC.
The complaint alleges violations of the minimum net capital and recordkeeping requirements of the Commodity Exchange Act and Commission regulations. On March 21, 2007, the Honorable Robert E. Payne, U.S. District Court Judge, issued a restraining order freezing the assets of Forefront and prohibiting the defendant from destroying documents or denying CFTC staff access to books and records.
According to the CFTC complaint, as of January 31, 2007, and perhaps earlier, Forefront’s net capitalization was below the adjusted net capital required by the Act and a Commission regulation. As of March 19, 2007, the complaint charges, Forefront’s adjusted net capitalization remained below the required adjusted net capital with Forefront’s total liabilities equaling $8,000,000 while its assets were only $6,760,000. Furthermore, the complaint charges Forefront with failing to maintain books and records that it is required to maintain pursuant to a Commission regulation.
On March 27, 2007, the court issued a preliminary injunction appointing a receiver to marshal the assets of Forefront. In the ongoing action, the CFTC seeks an order of permanent injunction against the defendant, monetary penalties, and other relief.
The Commission coordinated its investigation with, and was assisted by, the National Futures Association. The office of the United States Attorney for the Eastern District of Virginia provided assistance in this matter.
The Commission also notes that recently an unrelated firm, Forex Capital Markets LLC (FXCM), has issued a press release which contains inaccurate information relating to the proceedings in this matter. Specifically, FXCM inaccurately asserts that the CFTC’s approval is required for any transfer of customer accounts to another forex dealer. Contrary to FXCM’s claims, the court appointed a receiver who will independently assess offers for Forefront’s assets.
The following CFTC Division of Enforcement staff members are responsible for this matter: John Dunfee, Tracey Wingate, Mary Kaminski, Paul Hayeck, and Joan Manley.
Bruce Matson, Esq.
LeClair Ryan, A Professional Corporation
951 East Byrd Street. 8th Floor
Richmond, Virginia 23219
Last Updated: July 25, 2007