A New York appellate court has ruled against a receiver seeking to recover funds for victims of a Ponzi scheme operated by EminiFX, Inc. The court's decision, issued on October 13, 2026, dismissed the receiver's claims against Interactive Brokers LLC, stating that the doctrine of in pari delicto bars the lawsuit. This ruling affects the victims of the fraud, who were hoping to recover their lost investments.
The case, Castleman v. Interactive Brokers LLC, stems from a civil complaint filed by the Commodity Futures Trading Commission (CFTC) against EminiFX and its CEO, Eddy Alexandre, who was accused of running a Ponzi scheme. The CFTC appointed David A. Castleman as the temporary receiver for EminiFX on May 11, 2022, allowing him to take control of the company and its assets to protect the interests of the investors. Castleman later filed a lawsuit against Interactive Brokers, alleging negligence and aiding and abetting breach of fiduciary duty.
Castleman's complaint claimed that Interactive Brokers allowed Alexandre to transfer over $9 million of customer funds into his personal account and subsequently trade with those funds, despite knowing that Alexandre was engaging in fraudulent activities. The receiver argued that Interactive Brokers failed to conduct proper due diligence and allowed Alexandre to make risky investments that resulted in substantial losses for EminiFX's customers.
The case reached the Appellate Division after the Supreme Court in New York County granted Interactive Brokers' motion to dismiss the complaint on December 9, 2025. The court found that the in pari delicto doctrine, which prevents a wrongdoer from profiting from their own misconduct, applied to Castleman's claims. The court ruled that since Alexandre was the sole owner of EminiFX at the time of the alleged misconduct, the adverse interest exception to the doctrine did not apply.
Judge Marsha D. Michael, writing for the court, stated, "The common law doctrine of in pari delicto mandates that the courts will not intercede to resolve a dispute between two wrongdoers." The court affirmed that the receiver, acting on behalf of EminiFX, could not pursue claims against Interactive Brokers, which was alleged to have negligently facilitated Alexandre's fraudulent activities.
The ruling has significant implications for the victims of the EminiFX scheme, as it limits their ability to recover losses through legal action against third parties like Interactive Brokers. The court's decision reinforces the application of the in pari delicto doctrine, which has been upheld in previous cases, including the notable Kirschner v. KPMG LLP.
Castleman argued that as a receiver, he should not be subject to the same limitations as a corporate entity engaged in wrongdoing. However, the court maintained that the receiver stands in the shoes of the corporation and cannot assert claims that the corporation itself could not bring.
The dissenting opinion, written by Judge Ellen Gesmer, argued that the in pari delicto doctrine should not apply to a receiver acting solely for the benefit of innocent investors. Gesmer emphasized that the receiver was appointed to protect the interests of those who suffered losses and should not be barred from pursuing claims against those who may have contributed to the fraud.
The implications of this ruling extend beyond this case, as it sets a precedent for how courts may handle similar claims in the future. The decision may discourage receivers from pursuing claims against third parties, potentially leaving victims of corporate fraud with limited avenues for recovery.
Looking ahead, Castleman may consider appealing the ruling to a higher court, although the specific details regarding the potential for an appeal were not available in the court filing. The outcome of this case could influence future litigation involving receivers and their ability to recover funds for victims of fraud.