Monex Deposit Company, CFTC Center of CFTC Complaint

Commodity Futures Trading Commission (CFTC) ……
 

On Thursday, July 22, the Commodity Futures Trading Commission (CFTC) announced that the United States Court of Appeals for the Ninth Circuit affirmed a preliminary injunction in the CFTC’s anti-fraud enforcement action against Monex Deposit Company (Monex) and its affiliated companies and principals on July 20. This marks the second time the CFTC has prevailed in the Ninth Circuit in the Monex case after the court’s July 2019 ruling.

At issue was the district court’s order prohibiting Monex from operating its “Atlas” program, effectively shutting down the defendants’ unregistered trading platform for leveraged retail precious metals transactions and enjoining an alleged nationwide fraud. Monex claimed that they were entitled to the benefit of an exception to the CFTC’s jurisdiction for transactions that result in the “actual delivery” of the commodity to the purchaser. The Ninth Circuit affirmed the district court’s finding that Monex did not make “actual delivery” of any metals to its customers through the Atlas program.

“We are pleased with the Ninth Circuit Court’s decision, which reaffirms important protections established by Congress for markets and individuals,” said Acting Chairman Rostin Behnam.

Acting General Counsel Rob Schwartz added:

“The Ninth Circuit’s decision is clearly correct and bolsters our Division of Enforcement’s efforts to root out unlawful trading activity conducted by companies and individuals attempting to elude regulation under the Commodity Exchange Act (CEA).”

Case Background

The CFTC’s enforcement action, filed in 2017 and currently pending, charges the defendants with defrauding thousands of retail customers out of hundreds of millions of dollars while executing thousands of illegal, off-exchange leveraged commodity transactions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires that such trading be conducted on a regulated exchange and that the offeror be registered with the CFTC in accordance with the CEA and CFTC regulations. In a previous appeal, the Ninth Circuit affirmed the CFTC’s authority to bring enforcement cases against alleged fraud and held that “actual delivery” of commodities in leveraged retail commodity transactions requires transfer of a meaningful degree of possession or control of the commodity to the retail customer.

In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution for the benefit of defrauded customers, civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.

Legal Division staff members responsible for the appeal are Rob Schwartz, Anne Stukes, and Kyle Druding. The Division of Enforcement staff members responsible for this case are Joseph Konizeski, Carlin Metzger, Ansley Schrimpf, and Bryan Hsueh.

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CFTC’s Precious Metals Customer Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.

The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that entity. A company’s registration status can be found at NFA BASIC.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10% and 30% of the monetary sanctions collected paid from the Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.
 

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