LOS ANGELES – 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 to settle charges of fraud and illegal commodity transactions, the Commodity Futures Trading Commission (CFTC) announced Thursday.
The U.S. District Court for the Central District of California entered a consent order requiring the defendants to pay $33 million in restitution to customers harmed by their scheme and a $5 million civil monetary penalty. The order also permanently bars the Carabinis and their companies from trading futures or options on regulated markets, except for hedging purposes.
The CFTC initially filed its complaint in September 2017, alleging the defendants operated an illegal, off-exchange platform called “Atlas” offering leveraged retail commodity transactions in precious metals to thousands of customers between July 2011 and August 2021. Monex acted as the counterparty to every trade, and the CFTC alleged pervasive fraudulent sales solicitations.
“This settlement resolves a long-standing and significant precious metals case,” said Acting Director of Enforcement Gretchen Lowe. “The CFTC won a judgment against the defendants for illegally offering leveraged retail commodity transactions and established important law on the meaning of ‘actual delivery’ of commodities.” Lowe emphasized the agency’s commitment to protecting customers from such illegal schemes and recovering funds.
The case underwent substantial litigation, including two appeals to the Ninth Circuit Court of Appeals. The court previously granted summary judgment in favor of the CFTC on charges related to the illegal offering and execution of retail commodity transactions and issued a preliminary injunction against the defendants.
In addition to the financial penalties and trading bans, the order permanently enjoins the Carabinis and their companies from engaging in off-exchange leveraged retail commodity transactions and prohibits them from registering with the CFTC for ten years. General Counsel Rob Schwartz described the case as “historic,” noting its implications for the agency’s authority over fraud and its definition of “actual delivery” of commodities.
Source: CFTC.gov
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