CFTC Sues Monex Deposit Over Alleged $290 Million Metals Fraud Scheme

The scheme is one of the largest precious metals fraud cases in CFTC history.

The US Commodity Futures Trading Commission (CFTC) has filed a federal lawsuit in Illinois, charging three affiliated companies located in Newport Beach of California with defrauding customers through off-market commodity investment pools.

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The CFTC alleges that beginning in 2011 and through March 2017, Monex Deposit Company, Monex Credit Company, and Newport Services Corporation solicited the public to invest in commodity trading pools, scamming thousands of retail customers out of more than $290 million. The suit was also filed against the company’s principals Louis Carabini and Michael Carabini.

According to court records, California-based Monex Deposit and its subsidiaries offered leveraged trading in gold, silver, platinum and palladium to retail customers through its ‘Atlas’ program.

The order also finds that the company accepted clients’ trades and funds and therefore acted as a Futures Commission Merchant (FCM), without registering as such with the CFTC.

Using high-pressure sales tactics, the agency claims that Monex representatives “deceptively pitched leveraged trading through the Atlas program as a safe, secure and profitable way to invest in precious metals.” In reality, Monex’s Atlas trading program defrauded over 12,000 trading accounts through large price spreads on trades, plus commissions, interest on loans and administrative fees. In some cases, Monex’s spreads were 100 times higher than the standard rates offered on regulated exchanges.

James McDonald, the CFTC’s Director of Enforcement, commented: “Today, we announce the filing of one of the largest precious metals fraud cases in the history of the Commission. As alleged, the Defendants defrauded thousands of retail customers—many of whom are elderly—out of hundreds of millions of dollars as part of a multi-year scheme. Fraud in our markets, like that alleged here, undermines confidence, reduces transparency, and harms competition. As this investigation shows, we’ll work tirelessly to detect and prosecute fraud of the sort that’s alleged here.”

CFTC Commissioner Sharon Bowen added: “I am proud to support this enforcement action.  The kind of massive fraud alleged here goes to the heart of our core mission as an agency, and mine as a Commissioner. I came to the Commission committed to investor protection. And I leave with that commitment unshaken.”

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