U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

Office of Proceedings 

1155 21st Street, NW, Washington, DC 20581 

www.cftc.gov 

Sergei S. Laube and Galina Laube, 

Complainants, 

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v. 

Gain Capital Group LLC 

dfbfa Forex.com, 

Respondent. 

Introduction 

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CFfC Docket No. 13-Roo6 

INITIAL DECISION 

This dispute arises from the liquidation of a four-contract U.S. Dollar vs. Swiss 

Franc (USD/CHF) forex position in the joint account held by complainants Sergei and 

Galina Laube. The Laubes do not dispute that their account was under-margined by 

$1,080, but assert that respondent Gain Capital Group d/b/a Forex.com ("Gain") should 

have liquidated just one USD/CHF contract to cover the margin deficit, rather than all 

four contracts. They seek to recover the amount debited from their account on the 

disputed four-contract liquidation: $37,663.1 The Laubes also seek $109,917 in 

purported lost profits. Finally, the Laubes allege that Gain engaged in deceptive and 

detrimental margin, liquidation and asymmetrical slippage practices of the sort alleged 

1 Gain's August 2011 monthly account statement (attached as an exhibit to the Laubes' complaint), and Gain's 

breakdown of the losses on the August I, 2011 liquidation, confirm that $37,663 was debited for the disputed 

liquidation. The narrative in the Laubes' complaint erroneously states a slightly lower number. Amounts have been 

rounded to the nearest dollar. 
in a National Futures Association ("NFA") business conduct committee complaint which 

was resolved with a consent order before the Laubes would open their account with 

Gain. 

In reply, Gain has not challenged the Laubes' calculation that the margin shortfall 

could have been covered with the liquidation of just one USD/CHF contract and 

otherwise has not offered any insight into its decision to liquidate more than one 

contract. Rather, Gain has asserted that its standard customer contract, signed by the 

Laubes, gave Gain unfettered discretion to liquidate any or all open positions in the 

customer's account in the event the account reaches insufficient margin. In this 

connection, Gain asserts that the four contracts were properly liquidated due to 

insufficient account margin and that the liquidation was conducted in accordance with 

Gain's policies and procedures. Gain also denies that it engaged in deceptive and 

detrimental margin, liquidation and slippage practices of the sort set out in the NF A 

complaint, pointing out that the conduct that was the subject of the NFA complaint had 

occurred well before the Laubes opened their account and that the Laubes used a 

different trading platform than the one that was a subject of the NFA complaint. 

As explained below, after reviewing the parties' submissions,2 I have concluded 

that the Laubes have established that Gain's liquidation of all four contracts was not in 

good faith, and thus that they are entitled to recover $35,205 in damages.a 

2 The submissions considered are: the Laubes' complaint and exhibits, addendum to complaint, and closing 

argument: and Gain's answer and exhibits, and breakdown on the losses realized on the liquidation of each of the 

USD/CHF contracts. 

3 As explained below, the damage calculation is based on the losses realized on the first three of the four USD/CHF 

contracts bought by the Laubes. 

2 
Factual Findings 

The parties 

1. Sergei Simon Laube and Galina Laube are residents of Washington, DC. 

Neither side produced any evidence concerning their background or trading experience. 

The Laubes do not dispute Gain's assertion that Mr. Laube was the only person 

authorized to access, fund, withdraw and make all trading decisions regarding the 

account and that he "actively" traded their account from the time of account opening 

until August 1, 2011, the date of the disputed liquidation. Since Mr. Laube appears to 

have taken the lead in trading, references in this decision are to him, unless otherwise 

indicated. 

2. Gain Capital Group LLC dfb/a Forex/com. ("Gain" or "Forex.com."), located in 

Bedminster, New Jersey, is a registered futures commission merchant and retail foreign 

exchange dealer. Gain acted as the counter party to the Laubes' trades. 

Gain provided the proprietary platform, "ForexTrader," used by Laube during the 

lifetime of the account to access and place trades. 

3. The NFA business conduct committee ("BCC") complaint referenced by the 

Laubes in their complaint is In the matter of Gain Capital Group LLC and Glenn Harry 

Stevens (NFA case number 10-BCC-15). On June 30,2010, the NFA issued a Complaint 

against Gain and its owner that cited Gain for engaging in margin and liquidation 

practices that had a detrimental impact on certain of Gain's customers on certain 

slipped trades, failing to maintain records for certain unfilled orders that were placed on 

the Meta Trader trading platform prior to May 2009, failing to adequately review the 

activities and promotional material of Gain's unregulated solicitors, and failing to 

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respond promptly to certain inquiries and requests made by NFA during NFA's audit of 

Gain. 

On October 27, 2010, NFA's business conduct committee issued a Decision 

accepting an Offer of Settlement submitted by Gain and its owner, in which they neither 

admitted nor denied the allegations of the Complaint and agreed to settle the case. Gain 

agreed: one, to refund to customers the amount of negative slippage they experienced 

on the trades that were placed in their accounts between May 1 and July 31,2009 and 

which were attributable to the Virtual Dealer Plug-in that Gain used on its institutional 

and retail servers; two, to refund to customers the losses they incurred as a result of 

Gain's practice of adjusting leverage and margin requirements on Fridays; three, to pay 

$459,000 to NFA as a monetary sanction; four, that in the future any and all slippage 

parameters that Gain uses in determining whether a customer's order will be executed 

or re-quoted, shall be symmetrical in nature and neither advantageous nor 

disadvantageous to the customer or to Gain; and five, not to reinstate its practice of 

adjusting leverage and margin requirements on Fridays, which it had discontinued. 

The Forex.com customer agreement 

4· The Laubes opened a joint self-directed rolling spot foreign currency trading 

account with Gain on or about January 4, 2010. In this connection, they signed the 

Forex.com Customer Agreement ("Agreement"). 

s. Section 6 of the Agreement, titled "Liquidation Level," states that Gain has the 

ability to liquidate any or all of a customer's open positions upon the customer's account 

reaching insufficient account margin: 

Subject to all additional rights of Forex.com under the Customer 

Agreement, in the event that, in the sole opinion of Forex.com and in 

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accordance with Forex.com's reasonable best estimate of then prevailing 

obtainable market Spot Rates, and regardless of whether or not prior 

Margin Calls have been issued or met, if the Margin Balance should at any 

time equal or fall below the Minimum Margin Requirement for Customer's 

Account in the aggregate, Forex.com will have the right but not the 

obligation to liquidate any part of or all Open Position in Customer's 

Account. Clients are responsible for placing their own Stop Loss Orders to 

minimize losses. 

[Underlining added for em.phasis.] 

Section 9 of the Agreement, titled "Liquidation of Accounts and Deficit Balances," 

provides: 

In the event of: (a) Default; (b) insufficient Margin, or Forex.com's 

determination that any Collateral deposited to protect Customer's Account 

is inadequate, regardless of current market quotations, to secure 

Customer's Account; or (c) any other circumstances or developments that 

Forex.com, in its sole discretion, deems appropriate for its protection, 

Forex.com may, in its sole discretion, take one or more, or any portion, of 

the following actions: (1) satisfy any obligations Customer may have to 

Forex.com (either directly or by way of guarantee or suretyship) out of any 

of Customer's funds or property in the custody or control of Forex.com; 

(2) sell or purchase any or all Contracts and any securities or other 

property held or carried for Customer; (3) cancel any or all outstanding 

Orders or Contracts or other transactions or commitments made by or on 

behalf of Customer. Any of the above actions may be taken without 

demand for Margin or additional Margin, without prior notice of sale or 

purchase or other notice to Customer, Customer's legal representatives, 

heirs, executor, administrator, trustee, legatee, successors or assigns and 

regardless of whether the ownership interest is held individually or jointly 

with others. 

[Italics in original deleted.] 

Gain's Trading Handbook, published at the Forex.com website, provided in 

pertinent part: 

The minimum margin requirement is 2% (or 50:1) on the majors, s% of 

(20:1) for the minor currency pairs, and 100% (or 1:1) for spot gold and 

silver. 

Open positions are required to be fully margined at all times. There are no 

margin calls in forex trading. If a customer's account balance falls below 

reguired 100% maintenance margin. all open positions are subject to 

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automatic liquidation. Liquidations are handled in the following manner: 

the net open position with the greatest unrealized loss is closed first, 

followed by the next largest losing position and so on, until the 

maintenance margin requirement is satisfied or exceeded. Depending on 

the size and unrealized P&L of the open positions, customers risk having 

ALL open positions liquidated in order to meet the minimum margin 

requirement and incurring losses greater than the initial required margin. 

[Underlining added for emphasis.] 

Gain's margin monitoring services 

6. According to Gain, at the relevant time, Gain offered its customers a number 

of tools to help them stay abreast of their margin requirements. These included the 

"Margin & Pip calculator," the "Margin Monitor" on all Forex.com trading platforms, 

and 24-hour customer support. In addition, Gain allowed customers to set up free "rate 

alerts" through all Forex.com trading platforms, or the secure login site on the 

Forex.com home page, which consisted of emailed alerts that a specified rate has been 

reached or to monitoring the account and alerts to limit market exposure either by 

adding additional margin or by closing all or part of your open positions to avoid 

liquidation. However, on the record of this case, it cannot be determined: whether Gain 

charges for any of these various services, whether Gain specifically advised the Laubes to 

utilize any of these services, why the Laubes chose not to utilize any of these services, 

and whether or how utilization of any of these services would have avoided or 

minimized the Laubes' loss on the disputed liquidation. 

The disputed liquidation 

7· As noted above, the Laubes do not dispute Gain's assertion that Mr. Laube 

"actively" traded their account from the time of account opening until August 1, 2011, 

the date of the disputed liquidation. In this connection, neither side produced any 

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account statements, other than the August 2011 monthly account statement which 

reported: one, the $44,583 cash balance on July 29; two, that the four-contract 

USD/CHF position had been the only open position in the account; three, the $37,663 

debit for the disputed liquidation on August 1; four, a $6,920 cash balance after the 

liquidation on August 1; five, an interest transfer credit of $12 on August s; and six, a 

$6,932 cash balance on August 31.4 

In addition, the monthly account statement reminded the Laubes that Gain acted 

as the counter-party to their trades. 

8. On April 8, 2011, Mr. Laube bought the first of four 100,000 USD /CHF forex 

contracts, at the rate of 0.9099, with a margin requirement of $2,000. 

On April14, Laube bought the second 100,000 USD/CHF forex contract, at the 

rate of 0.88997, increasing the aggregate margin requirement to $4,000. 

On June 3, Laube placed a limit order to buy what would be the third 100,000 

USD/CHF forex contract, at the rate of 0.82033. This order would be executed on July 

13, increasing the aggregate margin requirement to $6,ooo. 

The day before, on June 2, Laube placed a limit order to buy what would be the 

fourth 100,000 USD/CHF forex contract, at the rate of o.8oo88. This order would be 

executed on July 25, increasing the aggregate margin requirement to $8,ooo. 

On July 13 and 25, Laube had been on vacation and away from his computer, and 

had forgotten about his pending orders. On this record, it cannot be determined when 

his vacation began and ended. 

9. On August 1, 2011, Gain determined that the margin balance in the Laubes' 

account had decreased to $6,920, which was $1,080 under the $8,ooo that Gain 

4 The cash balance would eventually be returned to the Laubes when they closed the account. 

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required for the Laubes to hold the four USD/CHF contracts. Gain determined to close 

out all four contracts, selling at a rate of 0.78167, and Gain debited the Laubes' account 

$37,663. 

The USD/CHF contract that had been bought on April4, at 0.9099, realized a 

loss of $16,405. The USD/CHF contract that had been bought on Apri114, at 0.88997, 

realized a loss of $13,855. The USD/CHF contract that had been bought on July 13, at 

0.82033, realized a loss of $4,946. The USD/CHF contract that had been bought on 

July 25, at o.8oo88, realized a loss of $2,458. 

10. Gain does not dispute the Laubes' assertion that the USD/CHF rebounded 

after the liquidation. 

11. On September 11, Mr. Laube called Gain's client services department to 

protest the liquidation. On September 26, Laube followed up with a letter seeking a 

refund of $35,363. 

On October 16, Gain's legal department responded that Gain would not be 

making any adjustment, because "the August 1st liquidation was performed correctly in 

accordance with [Gain's] stated policies and procedures." 

Conclusions 

Gain argues that its customer agreement gave it discretion to liquidate all open 

contracts in the Laubes' account, regardless of whether liquidation of a smaller number 

of contracts would have adequately closed the margin deficit. However, while the 

existence of a contractual provision authorizing liquidation of one or all open positions 

to meet a margin deficit is one of the facts and circumstances that should be considered 

in determining whether a margin-deficit liquidation was executed in good faith, it 

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should not be assumed that the rights given to customers by Section 4d of the Act have 

been absolutely waived by such an agreement.s See, e.g., Mills v. Smith Barney, Comm. 

Fut. L. Rep. , 22,762 (CFfC 1985). In other words, Gain's discretion was not unfettered, 

particularly in light of the fact that Gain acted as the counterparty to the Laubes' trades. 

Here, the Laubes have produced compelling evidence that the $1,080 margin deficit 

could have been met with the liquidation of just one forex contract, and thus have 

shifted the burden to Gain to show that its determination to liquidate all four contracts 

was in good faith. In contrast, Gain has produced no evidence justifying the liquidation 

of more than one contract in these circumstances, and thus has failed to show that the 

total liquidation was in good faith. 

Gain's bad faith liquidation of all four contracts violated its duty under Section 

4d(a)(2) of the Act to treat the Laubes' funds only for their benefit and in accordance 

with their instructions. The proper measure of damages for this violation is the Laubes' 

aggregate losses realized on the unnecessary August 1, 2011liquidation of the first three 

contracts bought on April4 and 14, and July 13,2011: $35,205.6 

Finally, the Laubes have failed to produce any reliable evidence in support of 

their claim for lost profits, and otherwise have failed to establish any other violations 

alleged in their complaint. 

5 Section 4d(a)(2) of the Act, 7 U.S.C § 6d(a)(2) (20 II), provides in pertinent part: "It shall be unlawful for any 

person to be a futures commission merchant unless- (2) such person shall, whether a member or nonmember of a 

contract market or derivatives transaction execution facility, treat and deal with all money, securities, and property 

received by such person to margin, guarantee, or secure the trades or contracts of any customer of such person, or 

accruing to such customer as the result of such trades or contracts, as belonging to such customer." 

6 This damage calculation has been based on the deducting, from $37,663 aggregate loss realized on the liquidation 

of all four contracts, the $2,458 loss realized on the liquidation of the fourth contract, which had been bought about a 

week before the liquidation. 

9 
ORDER 

Sergei and Galina Laube have established by a preponderance of the evidence 

that Gain Capital Group d/b/a Forex.com violated Section 4d(a)(2) of the Act and that 

this violation proximately caused $35,205 in damages. Accordingly, Gain Capital Group 

d/b/a Forex.com is ordered to pay to Sergei Laube and Galina Laube reparations of 

$35,205, plus pre-judgment interest on that amount at o.n%, compounded annually 

from August 1, 2011, to the date of payment, plus $250 in costs for the filing fee. 

Dated October 10, 2014. 

~VM0...z Philip V. McGuire, 

Judgment Officer 

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