Facts

Commodity Futures Trading Commission, an independent federal regulatory agency that is charged by Congress with administering and enforcing the Commodity Exchange Act and the Commission's Regulations promulgated thereunder, filed a complaint against Monex Deposit Company, Monex Credit Company, Newport Service Corporation, Louis Carabini, and Michael Carabini.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that during the relevant period, through its "Atlas" trading account, Monex allowed retail customers to trade gold, silver, platinum and palladium on a leveraged basis. Atlas transactions did not take place on a regulated exchange or board of trade. Instead, Monex operated its own retail over-the-counter platform, allowing customers to speculate on precious metals price movements, with Monex acting as the counterparty to every transaction. Plaintiff contended that Monex solicited customers to engage in leveraged trading by first touting the benefits of investing in precious metals as an asset class. Monex emphasized the benefits and importance of having physical precious metals in a portfolio of investments as a hedge against inflation, political and economic uncertainty, civil unrest and other factors and claimed that physical metals are intrinsically valuable, "unlike stocks and bonds." The majority of leveraged Atlas accounts lost money during the relevant period. Monex did not disclose its customers' performance to its customers or prospects. Despite the availability of transactional data showing significant losses being suffered by Atlas customers during the relevant period, Monex trained and incentivized its sales representatives to encourage prospects to open Atlas trading accounts, and to encourage leveraged trading in these accounts. Based on this conduct, defendants violated the Commodity Exchange Act and regulations promulgated thereunder.

DEFENDANTS' CONTENTIONS: Defendants denied all contentions.

Result

A consent judgment was entered against the defendants that requires them to pay $33 million in restitution and $5 million in civil penalties. Moreover, the order bars the defendants from trading futures or options on a regulated market, as well as from engaging in off-exchange leveraged retail commodity transactions.