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Major Precious Metals Dealer Ordered To Pay $38 Million By Federal Judge

The U.S. District Court for the Central District of California has entered a consent order against Monex Deposit Company, Monex Credit Company, Newport Services Corporation, and their owners Louis Carabini and Michael Carabini for a permanent injunction, monetary penalties, and equitable relief, the Commodity Futures Trading Commission (CFTC) announced today.

According to the decision, the defendants must pay $5 million in civil penalties on top of $33 million in compensation to customers. The defendants are further prohibited by the order from trading futures or options on a regulated market, unless they are doing so for hedging purposes. The defendants are also permanently barred from engaging in off-exchange leveraged retail commodity transactions or fraud, and they are prohibited from registering with the CFTC in any capacity for the next 10 years.

“This settlement resolves a long-standing and significant precious metals case that CFTC Enforcement staff fiercely and successfully litigated at the district court level, up to the court of appeals, and back to the district court,” said Acting Director of Enforcement Gretchen Lowe.

Monex HQ. Photo: Tony Vlogs

Lowe continued: “First, 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 under the CEA. This settlement resolved the remaining charges of fraudulent solicitation that lured unsuspecting customers into the highly risky leveraged trades, and obtained significant restitution for the victims of the unlawful conduct. The CFTC will take any action necessary to prevent and terminate such illegal transactions and return funds to the defrauded customers. I thank the team for their tenacious commitment to this case and ultimate success.”

General Counsel Rob Schwartz echoed the sentiment. “This is an historic case for the agency with implications far beyond metals trading. Not only did staff put a stop to a large-scale fraud and shut down an illegal, unregistered trading platform, but in the process developed important caselaw on the subject of actual delivery of any commodity, and fortified the agency’s strong anti-fraud authority. This comes at a critical time when the agency is contending with fraud across a broad range of commodity assets, both traditional and digital.”

The order settles a case brought by the CFTC against the defendants on September 6, 2017, in which it was claimed that while operating as a single entity, the defendants carried out illegal, off-exchange leveraged retail commodity transactions for thousands of customers and engaged in widespread fraudulent sales solicitations.

In addition to two appeals to the Ninth Circuit, the entry of a preliminary injunction against the defendants, an order granting summary judgment in favor of the CFTC on the charges relating to the offering and execution of illegal retail commodity transactions, and also the imposition of a permanent injunction prohibiting the defendants from engaging in leveraged retail commodity transactions, led to the order.

Cover Image: Monex

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