Some of the pitfalls of retail foreign exchange were highlighted at the start of February following the settlement of an enforcement action by the US National Futures Association against Boston-based Tradex Group [see Weekly FiX, February 9]. The NFA acted after it found that Tradex had contravened the Commodity Exchange Act.
As a result, the NFA permanently barred Tradex Group from membership after a complaint, filed in June 2006, alleged that it had solicited retail customers to trade off-exchange FX futures and options with its parent company, Swiss-based Tradex Handel & Beratungs (THB), now known as Tradex AG, in contravention of the Commodity Exchange Act.
As a result, Tradex Group was ordered to pay $22,144.53 in restitution to its US customers. Nicolaas Jansen van Rensburg, Tradex AG’s chief executive, is swift to disassociate himself from what went on in the Boston office. "First we have to note that a fine was imposed on Tradex Group and not on THB. This fine was actually not a fine but a refund to traders that traded on the Tradex platform," he says.
"Secondly also note that THB was merely an investor in Tradex Group LLC... Although we owned 80% of the shares,
it was clearly defined in the disclosure agreement that was on record with the NFA, that THB was not involved in the daily business of Tradex Group," he adds.
Craig Karlis, chief executive at Tradex Group Boston, is more forthright about what went on and claims that the company’s woes are completely the result of the actions of a former employee. "The man in question is Ryan Nettles. I am told he is currently running a company called Finex," he says.
"Mr Nettles, while employed by Tradex Group, took it upon himself to start a CTA. He did this without Tradex knowledge. When that happened he put Tradex Group in control of the NFA... He had all his commissions sent to an account in the Bahamas. He also had a dealing desk that offset all positions... After an audit all this information was revealed," Karlis adds. "Last week before the hearing the NFA acknowledged that THB was not involved with Tradex Group in any way, but Nick Jansen van Rensburg did have a commonality and therefore agreed to pay any losses that US clients may have absorbed by Mr Nettles’ actions."
Nettles disagrees with this view of what went on. When told that Tradex was blaming him for its woes, he replies: "Really? Well that’s definitely not true. Let me tell you they own the company, I was just an employee."
He adds: "All accounts were held at Tradex in Switzerland. Tradex in Switzerland started a company in the USA, which was a subsidiary. That’s what I did. I worked for that company. We were registered at the NFA as a CTA and we managed money on the futures markets and we traded through Aloron. The question the NFA has was that we also introduced business to Tradex in Switzerland."
Nettles admits that Tradex breached the Commodity Exchange Act. "When they came and audited Tradex Group, I found out that as an NFA member Tradex Group in Boston was not allowed to introduce US customers to a foreign entity and that’s where we got in trouble. That was it."
He says it is inevitable that he is being fingered as the villain of the piece by Tradex. "They don’t want to get into trouble themselves but I reported to them. Don’t tell me they didn’t know what was going on. They told me to do all of this," he claims. "A guy leaves [and] a company puts all the blame on that guy," he continues.
Nettles says he is now busy building up Finex, another Swiss-owned retail platform. Like Tradex, this is also a familiar name to many participants in the FX market. But just as Tradex Group was completely unconnected to the bigger and longer-established Tradex Capital, which felt forced to issue a clarification to its clients as a result of the NFA action [see Weekly FiX 9 February], Nettles’ new venture has nothing to do with the New York Board of Trade-owned exchange based in Dublin.
As for the bad mouthing between him and Karlis, Nettles has his own explanation. "He’s pissed off at me for some reason. I also took my customers away from Tradex. That’s why he’s all pissed off at me."
The last word on the issue goes to van Rensburg. "Please understand that Tradex Group was established by Ryan Nettles and John Wilson as the principals. THB was an investor that took 80% of the shares as security for the $250,000 investment that was made over a period of time... Ryan only informed me about the establishment of Tradex Group three months after it was already established and he said that Tradex Group would have taken care of the USA market and that THB will have no responsibility under this arrangement. It was also agreed that the shares would revert back to him once the loan/investment has been repaid. It never happened and we found out that he was doing business in Tradex Group in direct competition to THB. I asked him to resign, which he did."
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