Shortly after Effex Capital, which was implicated in FXCM’s exit from the US retail Forex market, filed a motion to reopen its defamation case against the National Futures Association (NFA), the Association has responded to the claims.

NFA filed its memorandum in opposition to Effex’s motion on February 9, 2022, in the Illinois Northern District Court. NFA argues that the Court should deny Effex’s motion.

The lawsuit brought by Effex has to do with the contents of the materials that NFA published when it settled the matter with FXCM back in 2017. On February 6, 2017, NFA issued a decision finding that an NFA member, FXCM, had violated NFA’s rules. Effex is not an NFA member and therefore cannot be disciplined by NFA. Nevertheless, Effex alleged that NFA made statements in the FXCM decision casting Effex in an unflattering light.

Effex asserted six counts, including but not limited, to tortious interference and defamation.

Effex contends the NFA Decision contained unopposed unappealable findings against Effex even though:

• (i) NFA had no jurisdiction over Effex;
• (ii) Effex was not a party to the NFA Investigation;
• (iii) Effex was not allowed to participate in the NFA Investigation;
• (iv) Effex was not subpoenaed to testify or produce documents in the NFA Investigation; and
• (v) Effex had no right to appeal or contest the NFA Decision.

Effex further contended that:

• (a) the Release and Narrative contained false and defamatory statements about Effex; and
• (b) NFA’s expressly referencing Effex in the NFA Publications constituted de facto regulation of Effex.

On April 5, 2018, Plaintiffs’ claims against NFA were dismissed by the District Court which found that Plaintiffs failed to exhaust their administrative remedies. Such dismissal was upheld on different grounds by the United States Court of Appeals for the Seventh Circuit, which found that Plaintiffs’ claims were preempted by the Commodities Exchange Act (CEA).

Thereafter, Plaintiffs sought relief before the CFTC which declined jurisdiction stating that Plaintiffs claims were outside NFA’s zone of interest.

Now, as Effex and Dittami seek to reopen the lawsuit, they claim that if their request for relief is denied, they will be precluded from even attempting to obtain relief for the pecuniary and reputational damage they incurred due to the allegedly false and defamatory statements.

NFA disagrees. The Association notes that the Seventh Circuit’s decision that Effex lacks a cause of action continues to be law of the case and binding precedent. The Seventh Circuit ruled that Effex could not sue NFA directly in federal district court. Instead, the Seventh Circuit held, Effex’s sole avenue to obtain judicial review of NFA’s decision was to seek relief from the CFTC, and then appeal any adverse CFTC ruling to a Court of Appeals.

Here, Effex lost its case before the CFTC and then failed to file a timely appeal to the Court of Appeals.

Effex’s failure to avail itself of that opportunity for judicial review does not open the door to a remedy that the Seventh Circuit held was unavailable, much less warrant reopening this case under Rule 60(b)(6), NFA concludes.