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Securities Regulation, Cryptotransactions Keyed to Goforth
United States Commodity Futures Trading Commission v. Monex Credit Co.
Citation:
931 F.3d 966 (2019)Facts
The CFTC alleged that Monex operated the Atlas Program since at least July 2011, making over 140,000 trades for more than 12,000 customer accounts. Through Atlas, investors purchased precious metals on margin by paying only 22-25% of the purchase price, with Monex financing the remainder. Monex controlled the off-exchange trading platform, acted as counterparty to every transaction, set all prices with 3% spreads, and retained sole discretion to issue margin calls and liquidate positions without notice. The metals remained in depositories chosen by Monex, with whom Monex had exclusive contractual relationships. Customers had no contractual relationship with depositories and could not access metals without full payment and specific delivery requests. The CFTC alleged Monex misrepresented Atlas as safe and profitable while using high-pressure sales tactics, when in fact the program’s structure ensured most customers would lose money. Approximately 90% of Atlas accounts suffered losses totaling $290 million, with Monex making margin calls in over 3,000 accounts and force-liquidating at least 1,850 accounts. Sales representatives received commissions based on accounts opened and transactions completed, not account performance, incentivizing aggressive sales regardless of customer outcomes.
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