NFA not to change announcement about action against FXCM

The United States National Futures Association (NFA) has won a dismissal of a defamation lawsuit brought against it by Effex Capital, the firm embroiled in the exit of FXCM from the US retail FX market.

Effex had alleged that NFA overstepped its regulatory powers by including Effex’s name into the materials it published on its website about the settlement with FXCM. In addition, NFA was alleged to have disclosed Effex Capital’s trade secrets and to have caused the company harm.

Effex and its CEO John Dittami had requested that the NFA removes or amends its announcement about FXCM from February 6, 2017.

Late on Saturday, March 31, 2018, Judge Andrea R. Wood of the Illinois Northern District Court issued an order granting the defendants’ motion to dismiss the case. The Judge noted that the case is dismissed for failure to exhaust administrative remedies. That is, before taking the matter to the Court, the plaintiffs should have used other formal means to solve the dispute.

NFA has argued that it is for the Commodity Futures Trading Commission, not the Court, to determine whether NFA erred in how it handled the FXCM proceeding, and whether NFA should be required to change its rules along the lines Effex suggests.

Let’s recall that Effex Capital and Dittami claim to have been damaged in an amount in excess of $10,000,000, with the precise amount to be determined at trial. The plaintiffs in the case, captioned Effex Capital, LLC et al v. National Futures Association et al (1:17-cv-04245), have also sought punitive damages in an amount sufficient to deter similar actions in the future.

Effex had requested NFA to remove the NFA Complaint, Decision, Narrative and Press Release in question its website or, in the alternative, delete all references to Effex and Dittami in the Narrative and issue a new release. The new release, according to the plaintiffs, should have stated that:

• NFA did not make any findings against Effex or Dittami;
• Effex was not a de facto dealing desk of FXCM;
• Effex was not controlled by FXCM;
• FXCM was not ordered to make any customer restitution.

Given the Judge’s decision, the announcements published by the NFA about its action against FXCM and settlements with the broker from February 6, 2017, will remain in their current form and the case against the US regulator will be closed. The dismissal is without prejudice to the plaintiffs seeking to exhaust their administrative remedies so that they may proceed in federal court.