UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
COMMODITY FUTURES TRADING COMMISSION, : CIVIL ACTION 96-7814
:
Plaintiff, : COMPLAINT FOR
: INJUNCTIVE RELIEF AND
: CIVIL PENALTIES
v. : UNDER THE COMMODITY
: EXCHANGE ACT, AS
WORLD WIDE CURRENCIES, INC. a/k/a : AMENDED, 7 U.S.C. 1, ET SEQ.
WORLDWIDE CURRENCIES, INC. a/k/a :
WORLDWIDE CURRENCIES LTD.; UNITED :
CURRENCIES CORP. a/k/a/ UNITED :
CURRENCIES, INC.; and A+ CURRENCIES :
INT'L INC. d/b/a INTERNATIONAL :
CURRENCIES, INC.,:
:
Defendants. :
:
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X
INTRODUCTION
Plaintiff, the Commodity Futures Trading Commission (the "Commission"), alleges that the defendants named herein ("Defendants") have offered and sold, and continue to offer and sell, to the general public contracts for the purchase and sale of a commodity (i.e., foreign currencies) for future delivery without such transactions being conducted on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity; cheated and defrauded customers in connection with such offer and sale; failed to register as futures commission merchants, in violation of Sections 4(a), 4b(a)(i), 4d and 9(a)(1) of the Commodity Exchange Act, as amended ("Act"), 7 U.S.C. 6(a), 6b(a)(i), 6d and 13(a)(1) (1988 and Supp. IV 1992).
Unless restrained and enjoined by this Court, the Defendants are likely to, and will, continue to engage in the acts and practices alleged in this Complaint and in similar acts and practices more fully described below.
Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. 13a-1 (1988 and Supp. IV 1992), the Commission brings this action to restrain and enjoin such acts and practices and compel compliance with the provisions of the Act and for a civil penalty and such other relief as this Court deems necessary and appropriate under the circumstances.
I. JURISDICTION AND VENUE
This Court has jurisdiction of this cause pursuant to Section 6c of the Act, 7 U.S.C. 13a-1 (1988 and Supp. IV 1992), which authorizes the Commission to seek injunctive relief against any person whenever it shall appear to the Commission that such person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of the Act or any rule, regulation, or order thereunder; and which authorizes the Commission to seek and the court, upon a proper showing, to impose on any person found in the action to have committed any violation, a civil penalty in the amount of not more than the higher of $100,000 or triple the monetary gain to the person for each violation.
Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. 13a-1(e) (1988 and Supp. IV 1992), in that Defendants are found in, inhabit or transact business in the Southern District of New York, and the acts and practices in violation of the Act have occurred, are occurring and are about to occur within the Southern District of New York, among other places.
II. PARTIES
PLAINTIFF
The Commodity Futures Trading Commission is an independent regulatory agency of the United States charged with the responsibility of administering and enforcing the provisions of the Commodity Exchange Act and promulgating, administering and enforcing the regulations thereunder. The Commission maintains its principal office at Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581, and maintains an office at One World Trade Center, Suite 3747, New York, New York 10048.
DEFENDANTS
World Wide Currencies, Inc. a/k/a Worldwide Currencies, Inc. a/k/a Worldwide Currencies, Ltd. ("Worldwide") was incorporated under the laws of the State of New York in or about January 1995. From about January 1995 until January 1996, Worldwide maintained its principal place of business at 805 Third Avenue, 8th Floor, New York, New York 10022. From about January 1996 to the present, Worldwide has continued to operate its business at 2 Rector Street, 15th Floor, New York, New York 10006. Worldwide has never been registered with the Commission in any capacity.
United Currencies Corp. a/k/a United Currencies, Inc. ("UCI") was incorporated under the laws of the State of New York in or about March 1995. UCI is a wholly owned subsidiary of Worldwide. From about July 1995 until January 1996, UCI maintained and conducted business at the same office location as Worldwide at 805 Third Avenue, 8th Floor, New York, New York. From about January 1996 to the present, UCI continues its business at the same location as Worldwide, 2 Rector Street, 15th Floor, New York, New York 10006. It has never been registered with the Commission in any capacity.
A+ Currencies Int'l Inc. d/b/a International Currencies, Inc. ("ICI") was incorporated under the laws of the State of New York in or about December 1995. It also maintains an office at 2 Rector Street, 15th Floor, New York, New York 10006. It has never been registered with the Commission in any capacity.
III. FEDERAL STATUTORY AND REGULATORY REQUIREMENTS
Section 4(a) of the Act, 7 U.S.C. 6(a) (1988 and Supp. IV 1992), makes it unlawful for any person to offer to enter into, enter into, execute, confirm the execution of, or to conduct business for the purpose of soliciting, accepting any order for, or otherwise dealing in any transaction in, or in connection with, a contract for the purchase or sale of a commodity for future delivery unless (1) such transaction is conducted on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity; (2) such contract is executed or consummated by or through a member of such contract market; and (3) such contract is evidenced by a written record showing the date, the parties to such contract and their addresses, the property covered and its price, and the terms of delivery; or, (4) unless exempted by the Commission pursuant to Section 4(c) of the Act, 7 U.S.C. 6(c) (Supp. 1988 and Supp. IV 1992).
Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4 (Supp. 1988 and Supp. IV 1992), and Section 1.2 of the Regulations, 17 C.F.R. 1.2, provide that the act, omission, or failure of any official, agent, or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office shall be deemed the act, omission, or failure of such individual, association, partnership, corporation, or trust, as well as of such official, agent, or other person.
Section 4b(a)(i) of the Act, 7 U.S.C. 6b(a)(i) (Supp. 1988 and Supp. IV 1992), makes it unlawful for any person to cheat or defraud or attempt to cheat or defraud any other person in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery.
Section 4d of the Act, 7 U.S.C. 6d (Supp. 1988 and Supp. IV 1992), makes it unlawful for any person to engage as a futures commission merchant in soliciting orders or accepting orders for the purchase or sale of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market unless such person shall have registered, under the Act, with the Commission as such futures commission merchant and such registration shall not have expired nor been suspended nor revoked. Section 1a(12) of the Act, 7 U.S.C. 1a(12) (1988 and Supp. IV 1992), provides that as used in the Act, the term "futures commission merchant" means an individual, association, partnership, corporation or trust that (A) is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market; and (B) in or in connection with such solicitation or acceptance of orders, accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom.
Section 9(a)(1) of the Act, 7 U.S.C. 13(a)(1) (1988 and Supp. IV 1992), makes it a felony for any person registered or required to be registered under the Act, or any employee or agent thereof, to embezzle, steal, purloin, or with criminal intent convert to such person's use or the use of another, any money, securities, or property having a value in excess of $100, which was received by such person or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the business of such person.
IV. GENERAL ALLEGATIONS
Unless stated otherwise, the period relevant to the allegations in this Complaint is from January 1995 through the present.
At all times relevant to this Complaint, Worldwide, UCI, and ICI (hereinafter, collectively, "the Defendants"), directly and acting through their officers, directors, managers, employees, account executives ("AEs") and agents, have engaged in the business of offering and selling to the public, futures contracts for the purchase or sale of commodities, without conducting those transactions on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity. More particularly, the Defendants have offered, and continue to offer, to the general public the opportunity to speculate in changes in the price of various foreign currencies, through the sale of futures contracts for the purchase or sale of various foreign currencies.
From January 1995 until at least January 1996, Worldwide offered and sold foreign currency futures contracts. In or about July 1995, after UCI was incorporated, UCI became the "retail arm" of Worldwide. UCI offers and sells foreign currency futures contracts which are the same in their terms, conditions and essential attributes as those previously offered and sold by Worldwide. At no time were the contracts offered and sold by Worldwide or UCI conducted on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity.
In or about January 1996, after the establishment of ICI, the business activities of Worldwide and UCI were combined under one corporate umbrella, conducting business under various names -- "A+ Currencies International Inc. d/b/a/ International Currencies Inc.," "International Currencies, Inc.," "International Currencies Inc.," "International Currencies," or "ICI." Through the combined business operation, ICI continues to offer and sell foreign currency futures contracts which are the same in their terms, conditions and essential attributes as those previously offered and sold by Worldwide and UCI. Similarly, the offer and sale of the contracts by ICI are not conducted on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity.
Contracts of the type being offered by the Defendants are not exempt from the requirement that their offer or sale be conducted on or subject to the rules of a properly designated contract market.
Recruitment of AEs and Solicitation of
Customer Accounts from the General Public
The Defendants recruit their AEs through advertisements placed in The New York Times and other newspapers. AEs recruited by the Defendants have little or no previous experience trading futures contracts or foreign currencies.
AEs recruited by the Defendants are responsible for soliciting and procuring potential customers, obtaining execution of customer agreements with customers, and communicating with customers. As compensation for their services, AEs are paid commissions from customers' investment funds.
The Defendants solicit prospective customers from across the country. The Defendants' solicitation methods include, but are not limited to, the following:
(a)"Cold-calling" individuals;
(b)Placing advertisements in business magazines;
(c)Running promotional announcements in radio stations;
(d)Placing advertisements on the internet;
(e)Mailing promotional "customer response cards" containing an "800" toll free telephone number.
Futures Contracts Offered by the Defendants
Notwithstanding their use of different corporate names, the Defendants use promotional literature and customer agreements which make the same claims, tout the same expertise and often use the same words. These documents state that customers' funds will be used for "trading in the spot foreign currency market." In actuality, the Defendants offer and sell to their customers contracts for the future delivery of foreign currency ("Contracts"), including British pounds, German marks, Swiss francs and Japanese yen, which are not traded on or pursuant to the rules of any contract market designated by the Commission.
Each Contract offered by the Defendants bears a number of characteristics of futures contract. For example, under the terms of Defendants' Contracts, open contract positions can be held open indefinitely before offset. Several traders and customers did not offset their positions for three to five days. Open contract positions in at least some accounts have been maintained as long as a certain "equity" sum was maintained in the account. The Defendants offer the Contracts to customers as a means for them to speculate on the price of the underlying foreign currency. It is the Defendants' policy to allow customers to "offset" or "liquidate" their open contract positions through an opposite and offsetting trade. The Defendants' customers do not intend or expect delivery of the physical commodities underlying the Defendants' Contracts, and they do not, in fact, make or take delivery.
In addition, each Contract for the purchase or sale of a particular currency provides for the same quantity of the underlying foreign currency as the contracts sold on the Chicago Mercantile Exchange, a Commission registered contract market for British pounds, Japanese yen and German marks. For example, each Contract for British pounds sterling consists of 62,500 British pounds, each Contract for Japanese yen consists of 12,500,000 yen, and each Contract for German marks consists of 125,000 German marks.
The Defendants encourage customers to deposit a minimum amount of money, ranging from $10,000 to $12,500, to open accounts, and most do so. The Defendants refer to a predetermined portion of the total contract price as the "margin" necessary for a customer or trader to establish an open long (buy) or short (sell) position in the customer's account. The Defendants require customers to pay additional "margin" whenever purportedly adverse market conditions cause a customer's account equity to fall below certain levels. The customer agreements used by the Defendants state that the customers are required to pay additional deposit or margin whenever the funds in their respective accounts fail to cover open contract positions.
Misrepresentations and Other Fraudulent Conduct
The Defendants, acting directly and through their officers, directors, managers, employees, AEs and agents, have made misrepresentations to prospective and existing customers concerning material facts related to the trading of the Contracts.
The Defendants, acting directly and through their officers, directors, managers, employees, AEs and agents, have made and continue to make, material misrepresentations to investors and prospective customers concerning the Defendants' trading experience. The misrepresentations and misleading statements made by the Defendants include, but are not limited to:
(a) "[O]ur clients have enjoyed a 33% - 41% return each year on their investment over the past two and a half years.";
(b)"$100,000.00 invested with Worldwide on November 1, 1994, would now be..........$126,460.87!";
(c)"[I]f you had invested just $150 thousand with us just 17 months ago, your actual balance net of commissions today would be $241,634.92!!!";
(d)"[T]his is what you can expect when you invest with International Currencies...[G]ain 33% - 41% per year profits by participating in a managed foreign currency account.";
(e)In or about February 20, 1996, ICI distributed a brochure which presented the purported "trading returns of an actual client" showing a $131,729.13 gain on a $150,000 investment for the period February 1994 through December 1995 and which further claimed that "all clients received the same percentage returns as this individual." (Emphasis in original.)
In making the statements referred to in paragraph 28 above, the Defendants knew the statements were false, or had no basis to believe the statements were true.
Upon information and belief, most of the customers lost substantial amounts of their investments and few, if any, customers made any profits by trading with money to the Defendants.
The Defendants, acting directly and through their officers, directors, managers, employees, AEs and agents, have made, and continue to make, material misrepresentations and omissions to prospective and existing customers concerning the risk of loss from trading the Contracts. These misrepresentations include, but are not limited to, the following:
(a)Statements in solicitation brochures provided to customers that "[y]ou'll be able to sleep well at night knowing we institute a 3% stop-loss on each and every trade"; and
(b)A statement made by an AE to a customer who deposited $10,000 that "[Worldwide] would not allow the equity in [the customer's] account to fall below $9,000."
In making the statements referred to in paragraph 33 above, the Defendants knew the statements were false, or had no basis to believe the statements were true.
Both existing and prospective customers were assured by Defendants that AEs would keep the customers informed as to the status of their accounts and that the customers would receive timely account statements and status reports so that the customers could monitor their accounts. In actuality, customers who attempted to discern the status of their accounts were often unable to obtain information as to the status of their accounts or were unable to contact the AEs the customers understood would be handling the accounts. Among those customers who succeeded in contacting their AEs, many were initially assured by the AEs that their accounts were profitable or that no activity had occurred in their accounts. When customers finally received account statements after repeated demands, weeks and months after the opening of the customer accounts, customers discovered that, contrary to the representations made by AEs, the accounts had been losing money and trading had taken place during a period in which customers were assured no trading had taken place.
Solicitation brochures and customer agreements provided by the Defendants to prospective and existing customers state that "[f]unds [are] available to client upon 48 hour notice" or "[a] client has access to their [sic] funds upon 48 hours notice." In fact, certain customers of the Defendants did not receive their funds as demanded. At least three customers have received no funds after repeated requests. At least one customer received the balance of the funds only after months of repeated demands or threats of lawsuits against the Defendants. Further, the Defendants attempted to condition return of customers' funds on the customers' signing release forms apparently in an attempt to cause customers to waive any and all rights they might have against the Defendants.
Solicitation brochures provided to prospective and existing customers by the Defendants state that customer funds would be deposited and maintained in "segregated accounts" or in accounts "in the client's name" with either Citibank, European American Bank ("EAB"), or Chemical Bank. There is no evidence that accounts were ever segregated or maintained in the client's name. In fact, despite contrary representations, customer funds received by Defendants for the purchase or sale of futures contracts have been deposited into a bank account held under the name of "Worldwide Currencies Ltd.," or in a bank account under the name of "A+ Currencies, Inc. d/b/a International Currencies."
A customer check originally made payable solely to the customer and sent to Worldwide for the purpose of opening a bank account under the customer's name to purchase or sell futures contracts was altered with a marking "/Worldwide C." written on the check next to the customer's name as payee without any authorization by or prior notice to the customer. The customer check was deposited into an account maintained under the name of "Worldwide Currencies Ltd.," and not to an account under the customer's name.
V. VIOLATIONS OF THE COMMODITY EXCHANGE ACT
COUNT ONE
VIOLATIONS OF SECTION 4(a) OF
THE ACT: OFFER AND SALE OF COMMODITY FUTURES CONTRACTS
NOT CONDUCTED ON OR SUBJECT TO THE RULES OF A BOARD
OF TRADE WHICH HAS BEEN DESIGNATED BY THE COMMISSION
AS A CONTRACT MARKET FOR SUCH COMMODITY
The allegations set forth in paragraphs 1 through 36 are realleged and incorporated herein by reference.
The Contracts in foreign currencies offered and sold by the Defendants are contracts for the purchase or sale of commodities for future delivery.
The Defendants, acting directly and through their officers, directors, managers, employees, AEs and agents, have offered to enter into, entered into, executed or confirmed the execution of, or have conducted an office or business in the United States for the purpose of soliciting or accepting orders for, or otherwise dealing in, transactions in, or in connection with, contracts for the purchase or sale of commodities for future delivery.
The Contracts were not conducted on or subject to the rules of a contract market and were not executed or consummated by or through a member of a board of trade which has been designated by the Commission as a contract market.
The Defendants are each directly liable for violating Section 4(a) of the Act, 7 U.S.C. 6(a) (1988 and Supp. IV 1992).
Pursuant to Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4 (1988 and Supp. IV 1992), and Section 1.2 of the regulations thereunder ("Regulations"), 17 C.F.R. 1.2, the Defendants are liable for any violations of Section 4(a) of the Act, 7 U.S.C. 6(a) (1988 and Supp. IV 1992), by the officers, directors, managers, employees, AEs and agents and employees of the Defendants, in that all such violations were within the scope of their offices or employment with the Defendants.
For all the foregoing reasons, the Defendants are each liable for violations of Section 4(a) of the Act, 7 U.S.C. 6(a) (1988 and Supp. IV 1992).
COUNT TWO
VIOLATIONS OF SECTION 4b(a)(i)
OF THE ACT: FRAUD IN THE OFFER AND
SALE OF COMMODITY FUTURES CONTRACTS
The allegations set forth in paragraphs 1 through 43 are realleged and incorporated herein by reference.
The Defendants, acting directly and through their officers, directors, managers, employees, AEs and agents, sell contracts for the sale of a commodity for future delivery to persons that are or could be used for (a) hedging any transaction in interstate commerce in such commodity or the products or by-products thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof.
Since at least in or about January of 1995, the Defendants, acting directly and through their officers, directors, managers, employees, AEs and agents, have cheated or defrauded, or attempted to cheat or defraud, other persons, in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, for or on behalf of other persons by making false, deceptive and/or misleading representations of material fact or omitting, or failing to disclose, material facts by:
Misleading customers or prospective customers as to the likelihood of profits from entrusting their money to the Defendants;
Misrepresenting to investors or prospective customers the Defendants' historical trading performance and misrepresenting Defendants' investment expertise and experience, by disseminating to prospective and existing customers brochures which reported fictitious or greatly exaggerated past annual returns on investments and which represented that Defendants had substantial experience and long term success in trading futures;
Misrepresenting to investors or prospective customers the risk associated with giving the Defendants customer monies by making misleading oral and written statements relating to (1) the Defendants' handling of customer funds; (2) the Defendants' use of stop-loss mechanisms to limit the effect of adverse market moves; and (3) the Defendants' intentions to stop "trading" customer accounts when those accounts fell below a set minimum; and
Misrepresenting that customer monies would be kept in segregated, interest bearing accounts in the customers' names, readily available for customer withdrawal, when in fact such monies were not kept in such segregated accounts and were not available to customers upon request.
In making the statements referred to in paragraph 47 above, the Defendants knew the statements were false, or had no basis to believe the statements were true.
The Defendants are each directly liable for violations of Section 4b(a)(i) of the Act, 7 U.S.C. 6b(a)(i) (1988 and Supp. IV 1992).
Pursuant to Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4 (1988 and Supp. IV 1992), and Section 1.2 of the Regulations, 17 C.F.R. 1.2, the Defendants are liable for any violations of Section 4b(a)(i) of the Act, 7 U.S.C. 6b(a)(i) (1988 and Supp. IV 1992), by their officers, directors, managers, employees, AEs and agents, in that all such violations were within the scope of their office or employment with Defendants.
For all the foregoing reasons, the Defendants are each liable for violations of Section 4b(a)(i) of the Act, 7 U.S.C. 6b(a)(i) (1988 and Supp. IV 1992).
COUNT THREE
VIOLATIONS OF SECTION 4d OF THE ACT:
ACTING AS AN UNREGISTERED FUTURES COMMISSION MERCHANT
Paragraphs 1 through 50 are realleged and incorporated herein.
As defined in Section 1a(12) of the Act, 7 U.S.C. 1a(12) (1988 and Supp. IV 1992), the term "futures commission merchant" means an individual, association, partnership, corporation or trust that (A) is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market; and (B) in or in connection with such solicitation or acceptance of orders, accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom.
From at least January 1995, by their acts and practices occurring in the Southern District of New York and elsewhere, the Defendants engaged as futures commission merchants in soliciting orders or accepting orders for the purchase and sale of a commodity for future delivery, or involving contracts of sale of a commodity for future delivery, on or subject to the rules of any contract market, without registering under the Act with the Commission as futures commission merchants, in violation of Section 4d of the Act, 7 U.S.C. 6d (1988 and Supp. IV 1992).
For all the foregoing reasons, the Defendants are each liable for violations of Section 4d of the Act, 7 U.S.C. 6d (1988 and Supp. IV 1992).
COUNT FOUR
VIOLATIONS OF SECTION 9(a)(1) OF THE ACT:
CONVERSION OF CUSTOMER FUNDS
The allegations set forth in paragraphs 1 through 54 are realleged and incorporated herein by reference.
Through the course of conduct described above, the Defendants have embezzled, stolen, purloined or with criminal intent converted to their own use money, securities or property having a value in excess of $100, which was received by them to margin, guarantee, or secure the trades or contracts of customers, or which accrued to such customers, or which was a result of such trades or contracts, or which was otherwise received from any customer in connection with Defendants' business, all of which was in violation of Section 9(a)(1) of the Act, 7 U.S.C. 13(a)(1) (1988 and Supp. IV 1992).
The Defendants each are directly liable for violating Sections 9(a)(1) of the Act, 7 U.S.C. 13(a)(1) (1988 and Supp. IV 1992).
Pursuant to Section 2(a)(1)(A)(iii) of the Act, 7 U.S.C. 4 (Supp. 1988 and Supp. IV 1992), and 1.2 of the Regulations, 17 C.F.R. 1.2, the Defendants are liable for any violations of Section 9(a)(1) of the Act, 7 U.S.C. 13(a)(1), by their officers, directors, managers, employees, AEs and agents, inasmuch as all such violations were within the scope of their office or employment with the Defendants.
For all the foregoing reasons, the Defendants are each liable for violations of Section 9(a)(1) of the Act, 7 U.S.C. 13(a)(1) (1988 and Supp. IV 1992).
VI. RELIEF REQUESTED
WHEREFORE, Plaintiff, the Commodity Futures Trading Commission, respectfully requests that this Court enter:
A.Orders of preliminary and permanent injunction, restraining and enjoining Defendants and any other officers, agents, servants, employees, attorneys-in-fact, successors, assigns, directors, subsidiaries, affiliates, and any other persons or entities in active concert or participation with them who receive actual notice of such order by personal service or otherwise, from directly or indirectly:
(1)Offering to enter into, entering into, executing, or confirming the execution of, or conducting any office or business anywhere in the United States, its territories or possessions, for the purpose of soliciting or accepting any order for, or otherwise dealing in, any contract for the purchase or sale of a commodity for future delivery, unless such transaction is conducted on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity; and unless such contract is executed or consummated by or through a member of such contract market; and unless such contract is evidenced by a record in writing which shows the date, the parties to such contract and their addresses, the property covered and its price, and the terms of delivery, in violation of Section 4(a) of the Act, 7 U.S.C. 6(a) (1988 and Supp. IV 1992);
(2)Cheating or defrauding or attempting to cheat or defraud any person in or in connection with any order to make, or the making of, any contract for the sale of any commodity for future delivery, made, or to be made, on, for or on behalf of any other person if such contract for future delivery is or may be used for (a) hedging any transaction in interstate commerce in such commodity or the products or by-products thereof, or (b) determining the price basis of any transaction in interstate commerce in such commodity, or (c) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof, in violation of Section 4b(a)(i) of the Act, 7 U.S.C. 6b(a)(i) (1988 and Supp. IV 1992);
(3)Engaging as a futures commission merchant in soliciting orders or accepting orders for the purchase or sale of any commodity for future delivery (including but not limited to foreign currencies), or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market without being registered in violating Section 4d of the Act, 7 U.S.C. 6d (1988 and Supp. IV 1992); and
(4)Violating Section 9(a)(1) of the Act, 7 U.S.C. 13(a)(1) (1988 and Supp. IV 1992), by embezzling, stealing, purloining, or with criminal intent converting to such person's use or to the use of another, any money, securities, or property having a value in excess of $100, which was received by such person or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the business of such person. The word "value" as used in this paragraph means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.
B.An order directing that an accounting be made of all assets and liabilities of the Defendants, and any successors thereof, together with all funds received and paid out, in or in connection with all commodity futures transactions, from the date the Defendants began operations, to and including the date of such accounting; together with an accounting of all salaries, commissions, fees, loans, and other disbursements of money and property of any kind, in or in connection with commodity futures transactions, from the date the Defendants began operations, to and including the date of such accounting; and that such accounting shall be accomplished under the supervision of the Court or such officer as the Court may appoint or designate, or upon such terms and conditions as the Court may deem appropriate.
C.An Order directing the Defendants and any successors thereof, to disgorge pursuant to such procedure as the Court may order, all benefits received from the acts or practices which constituted violations of the Act or Regulations, as described herein, and interest thereon from the date of such violations;
D.An Order rescinding all contracts entered into by the Defendants with their customers;
E.An Order directing Defendants to make full restitution to every customer whose funds were received by them as a result of acts and practices which constituted violations of the Act or Regulations, as described herein, and interest thereon from the date of such violations; F.A civil penalty in the amount of not more than the higher of $100,000 or triple the monetary gain to Defendants for each violation of the Act or Regulations, as described herein; and
G.Such other and further relief as the Court may deem necessary and appropriate under the circumstances.
Respectfully submitted,
ERNESTO MARRERO, JR. (5609)
REGIONAL COUNSEL
________________________
LINDA Y. PENG (2447)
Trial Attorney
________________________
RONALD WOLF (2428)
Trial Attorney
Attorneys for Plaintiff
Commodity Futures Trading Commission
Division of Enforcement
One World Trade Center
Suite 3747
New York, New York
(212) 466-2027
Dated:October 15, 1996
New York, New York