Louis Carabini and his brother, Michael Carabini, along with their companies Monex Deposit Company, Monex Credit Company, and Newport Services Corporation, will pay $38 million following a settlement with the Commodity Futures Trading Commission (CFTC). The U.S. District Court for the Central District of California entered a consent order on December 21, 2022, imposing the penalties and restrictions.
The order mandates $33 million in restitution to customers defrauded by the defendants’ scheme. A further $5 million civil monetary penalty will also be paid. Louis Carabini, Michael Carabini, and their associated companies are permanently barred from trading futures or options unless it’s for legitimate hedging purposes. They are also prohibited from registering with the CFTC for the next 10 years.
The CFTC initially filed its complaint against the defendants on September 6, 2017, alleging the operation of an illegal, off-exchange leveraged retail commodity trading platform called “Atlas.” The platform, operating between July 16, 2011, and August 31, 2021, allowed customers to speculate on precious metals prices, with Monex acting as the counterparty to all transactions.
According to the CFTC, the defendants engaged in “pervasive fraudulent sales solicitations,” luring unsuspecting customers into high-risk leveraged trades. The agency secured a judgment against the defendants for offering these illegal transactions and established legal precedent regarding “actual delivery” of commodities. This case involved extensive litigation, including two appeals to the Ninth Circuit Court of Appeals, a preliminary injunction, and a summary judgment in favor of the CFTC regarding the illegal transactions.
“This settlement resolves a long-standing and significant precious metals case,” said Acting Director of Enforcement Gretchen Lowe. “This obtained significant restitution for the victims of the unlawful conduct.”
General Counsel Rob Schwartz characterized the case as “historic” for the agency, with implications extending beyond metals trading, highlighting the development of caselaw on commodity delivery and strengthening the CFTC’s anti-fraud authority.
Source: CFTC.gov
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