Agency: Commodity Futures Trading Commission/CFT
On September 6, 2017, the US Commodity Futures Trading Commission (CFTC) filed a civil injunctive enforcement action in the U.S. District Court for the Northern District of Illinois against Monex and it’s principals Louis Carabini and Michael Carabini. The CFTC Complaint alleges Monex defrauded thousands of retail customers nationwide out of hundreds of millions of dollars, while executing thousands of illegal, off-exchange leveraged commodity transactions.
The complaint alleges Monex deceptively pitches leveraged trading through the Atlas program as a safe, secure and profitable way to invest in precious metals when in reality nearly everyone who placed leveraged trades in an Atlas account between July of 2011 and March of 2017 lost money. According to the Complaint, over 12,000 trading accounts were used to place leveraged precious metals trades resulting in more than $290 million in customer losses between July 16, 2011 and March 31, 2017. The Complaint alleges that in order to push customers into the Atlas program and to generate trades, the Defendants employed high-pressure sales tactics, systematically downplayed the risks associated with the Atlas program, and falsely promised customers that Monex would act as the customers’ fiduciary and would always act in those customers’ best interests. As a result of Defendants’ conduct, many customers lost their life savings, while Monex and its owners pocketed millions of dollars, the Complaint alleges.
The Complaint further alleges that Defendants’ leveraged commodity transactions are unlawful because they were not, and are not, executed on or subject to the rules of a regulated exchange, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, effective July 16, 2011.
The Complaint also alleges that the Defendants were required to register as Futures Commission Merchants (FCMs) but failed to do so in violation of the Commodity Exchange Act. Individual Defendants Louis and Michael Carabini are charged directly with the offering of the unlawful leveraged commodity transactions and charged with the fraud and registration violations as controlling persons of Monex who knowingly induced the underlying violations or failed to act in good faith.
The CFTC is seeking preliminary injunctive relief to enjoin Monex from continuing to market the Atlas program to retail customers, and appointment of a monitor over Monex for the Atlas trading accounts. The requested preliminary injunction Order would prohibit the Defendants from trading, soliciting orders, committing fraud, or engaging in business activity related to contracts or transactions regulated by the CFTC until there is a final decision on the merits. In its continuing litigation, the CFTC seeks disgorgement of ill-gotten gains, restitution for the benefit of defrauded pool participants, civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of federal commodities laws, as charged.
Details of the complaint can be located here.
Date of Action: 9/6/2017