The U.S. Court of Appeals for the Ninth Circuit has upheld a preliminary injunction against Monex Deposit Company and its principals, effectively shutting down their unregistered trading platform, “Atlas.” The ruling, issued July 20, marks the second time the CFTC has successfully defended its case against Monex in the Ninth Circuit.
The CFTC originally filed its anti-fraud enforcement action in 2017, alleging that Monex defrauded thousands of retail customers out of hundreds of millions of dollars through illegal, off-exchange leveraged precious metals transactions. Monex argued it was exempt from CFTC jurisdiction because its transactions resulted in “actual delivery” of the commodity. However, the court affirmed the district court’s finding that Monex did not make “actual delivery” of any metals to its customers.
“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 that the ruling “bolsters our Division of Enforcement’s efforts to root out unlawful trading activity.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandates that leveraged retail commodity trading be conducted on regulated exchanges, and that offerors be registered with the CFTC. A previous appeal saw the Ninth Circuit affirm the CFTC’s authority to pursue enforcement cases against fraud and establish that “actual delivery” requires a meaningful transfer of possession or control to the customer.
The CFTC is continuing to litigate the case, seeking disgorgement of ill-gotten gains, restitution for defrauded customers, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of federal commodities laws.
Customers who suspect fraud can report suspicious activity to the CFTC via a toll-free hotline at 866-FON-CFTC or file a tip online. The CFTC also offers a Precious Metals Fraud Advisory to help customers identify potential scams.
Source: CFTC.gov
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