Five defendants to pay more than $4 million for engaging in illegal Foreign Currency options scheme

Court finds that customers were defrauded of more than $1.8 million

Washington, DC — The Commodity Futures Trading Commission (CFTC) today announced that it obtained more than $4 million in civil monetary penalties in orders entered by the U.S. District Court for the Southern District of Florida against defendants in CFTC v. Sterling Trading Group, et al., a CFTC enforcement action filed in June, 2004. The CFTC alleged that the defendants committed fraud in connection with the offer of illegal foreign currency (Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term) contracts to retail customers, who were defrauded of more than $1.8 million (see CFTC Press Release 4946-04, June 29, 2004).

Judge Kevin Michael Moore entered three separate consent orders of permanent injunction against defendants Graystone Brown Financial Inc. (Graystone) and STG Global Trading Inc. (STG); Andrew Stern and QIX, Inc. (QIX); and Joseph Arsenault.

The orders require defendants to pay a total of $4,185,000 in civil monetary penalties as follows: QIX, $2 million; Graystone, $1 million; STG, $500,000; Arsenault, $415,000; and Stern, $270,000. The orders also permanently bar QIX, Graystone and STG from engaging in any commodity-related activity. The orders also permanently bar Arsenault and Stern from engaging in any commodity trading on behalf of others on any exchange or soliciting or accepting any funds from others for any on-exchange commodity trading. The orders permanently ban all defendants from applying for registration, engaging in any activity requiring registration or acting as a principal, agent or any other officer or employee of any registered entity or person required to be registered.

The consent orders find that, from at least August, 2003, through at least June, 2004, Graystone and STG, through their account executives, fraudulently solicited retail customers to engage in off-exchange forex options transactions with QIX as the counterparty to each transaction. According to the orders, customers solicited by the Graystone and STG account executives lost at least $1,826,929.50 during the period, and virtually all Graystone and STG customers who opened accounts suffered trading losses. None of the defendants were registered with the CFTC during the relevant period.

The orders hold Stern liable as the controlling person of QIX for its illegal offer and sale of off-exchange forex options, hold Arsenault liable as the controlling person of Graystone and hold STG liable for the fraudulent conduct of those firms’ account executives. Finally, QIX is held derivatively liable as a principal for the fraudulent conduct of its agents, Graystone and STG.

The CFTC appreciates the assistance of the Florida State Office of Financial Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term.

The following CFTC Division of Enforcement staff members are responsible for this case: Peter M. Haas, Eugene Smith, Kyong J. Koh, Christopher Giglio, Paul G. Hayeck and Joan Manley.