Electronic trading major Interactive Brokers and the Court-appointed receiver in the lawsuit against Ponzi scheme EminiFX are locking horns in a legal battle.
David A. Castleman (the “Receiver”), in his capacity as Receiver for EminiFX, Inc., has filed a complaint against Interactive Brokers LLC (“IBKR”) accusing the broker of negligence and aiding breach of fiduciary duty.
The Receiver was appointed by the Honorable Valerie E. Caproni of the United States District Court, Southern District of New York. On May 11, 2022, the Commodity Futures Trading Commission (CFTC) filed a civil complaint in the action styled Commodity Futures Trading Commission v. Alexandre et al (11-cv-03822) against Alexandren and EminiFX based on allegations, generally, that EminiFX was operated by its leadership as a Ponzi-like scheme.
The Receiver has carried out the removal of all previous EminiFX leadership, has taken control of the business, and has now commenced an instant action against IBKR to recover damages solely for the benefit of the customers of EminiFX.
Importantly, the Receiver has eliminated all wrongdoers from any possibility of any recovery from the instant action, all of which will be overseen by the United States District Court for the Southern District of New York.
The Receiver sues IBKR herein for recovery solely for the benefit of the customers of EminiFX, because when IBKR approved Alexandre’s deposits of millions of dollars into his personal account in December 2021 and January 2022—most of which were subsequently lost— IBKR knew the deposited funds were from the customers of EminiFX. Further, the Receiver alleges that IBKR either knew or should have known from the due diligence and investigation it undertook that EminiFX was being run as a Ponzi scheme.
According to the Receiver’s complaint, tens of thousands of individuals who deposited money into EminiFX have been harmed by the wrongful actions and inaction of IBKR which knowingly enabled and substantially assisted Alexandre to unlawfully deposit more than $9 million of EminiFX investor funds into his personal account at IKBR.
The Receiver claims that Alexandre then lost more than $7 million of those funds through wildly risky investments on IBKR’s trading platform, as well as through IBKR’s own negligence.
On July 6, 2022, all that was left for the Receiver to recover for the Customers from Alexandre’s personal IBKR account was $1,752,994.40.
By the time the Receiver was appointed to take over EminiFX, the total losses in EminiFX (excluding any promised profits) totaled $55,397,380, according to the Financial Condition Report filed by the Receiver in the CFTC Action.
The Receiver requests judgment:
- On the First Cause of Action, awarding in favor of Plaintiff and against Defendant, damages for Gross Negligence, in an amount not less than $7,287,055.60, plus interest, costs and attorneys’ fees;
- On the Second Cause of Action, awarding in favor of Plaintiff and against Defendant, damages for Negligence, in an amount not less than $7,287,055.60, plus interest, costs and attorneys’ fees;
- On the Third Cause of Action, awarding in favor of Plaintiff and against Defendant, damages for Aiding and Abetting Breach of Fiduciary Duty, at a minimum in an amount not less than $7,287,055.60 plus punitive damages, interest, costs and attorneys’ fees.
- Awarding Plaintiff such other and further relief as this Court deems just and proper.
On January 9, 2025, Interactive Brokers responded to the complaint.
IBKR argues that Receiver’s authority is constrained by this Court’s appointing orders which do not empower him to bring these claims “solely for the benefit of the customers of EminiFX,” as he purports to do. The Receiver is only authorized, by those orders and by receivership law, to bring claims that belong to the Receivership Defendants (here, EminiFX and Alexandre) and which form part of the Receivership Estate.
The broker says that the EminiFX “Customers” on whose behalf the Receiver purports to act are not Receivership Defendants and any claims they have are not part of the Receivership Estate. The defrauded investors were never parties to the receivership litigation and the Receiver has no authority to sue in their names. By bringing the Complaint, the Receiver has acted ultra vires – this action is an impermissible overreach of his Court-ordered authority.
Lastly, according to IBKR, Plaintiff fails to state claims of gross negligence, negligence, and aiding and abetting breach of fiduciary duty. With respect to gross negligence and negligence, the Complaint admits that IBKR never opened an account for EminiFX, and brokerages do not owe a duty to non-customers. That alone defeats those claims.
According to IBKR, Plaintiff’s aiding-and-abetting claim similarly is without merit. As the U.S. Supreme Court recently held, the provision of lawful goods and services in the ordinary course of business is insufficient as a basis for aiding-and-abetting liability.
The lawsuit continues in the New York Southern District Court.
