The Commodity Futures Buying and selling Fee (CFTC) has moved the Courtroom for preliminary injunction in its case towards My Foreign exchange Funds.
The related paperwork had been submitted on November 9, 2023 within the New Jersey District Courtroom.
The CFTC seeks an order persevering with the Courtroom’s Statutory Restraining Order (SRO), in addition to order enjoining future violations of the Act and Fee Laws.
Let’s recall that, on August 28, 2023, the Commodity Futures Buying and selling Fee filed a Grievance for Injunctive Reduction, Civil Financial Penalties, and Different Equitable Reduction towards Merchants International Group Inc., a New Jersey company, d/b/a “My Foreign exchange Funds”, Merchants International Group Inc., a Canadian enterprise group, and Murtuza Kazmi. The CFTC accused the defendants of violations of the Commodity Alternate Act (“Act”), 7 U.S.C §§ 1-26, and accompanying Fee Laws, 17 C.F.R. pts. 1-190 (2022) .
The CFTC seeks that the Courtroom enters an order enjoining the defendants, and any particular person appearing in lively live performance or participation with the defendants, from partaking within the charged misconduct, i.e., soliciting clients for participation within the My Foreign exchange Funds packages, or appearing as counterparty to clients in retail foreign exchange or retail commodity transactions as Merchants International has finished with respect to clients buying and selling “stay accounts.”
A preliminary injunction is acceptable the place the CFTC has made a prima facie case that the defendants have engaged in fraud, significantly with respect to retail clients. A preliminary injunction can be applicable in instances the place no fraud is alleged, however the defendant is engaged in an “unlawful enterprise” with out required registration.
The CFTC notes that the sheer scope of the defendants’ unregistered RFED, and off-exchange retail commodity buying and selling, enterprise compels the conclusion that preliminary injunctive aid is required.
The asset freeze and requirement to take care of books and information and to offer such information promptly to the CFTC and the everlasting receiver, topic to any legitimate assertion of privilege, underneath the present statutory restraining order ought to proceed as modified by the Courtroom’s subsequent orders. The asset freeze is justified by the necessity to protect funds for disgorgement or restitution, and
to forestall switch or dissipation of belongings by the defendants, two of whom (Kazmi and Merchants International Canada) reside exterior of the US.
The previously-appointed short-term receiver is ready to be discharged, and a brand new everlasting receiver is to be appointed. The everlasting receiver might be John Carney of Baker & Hostetler LLP. The short-term receiver will work to make sure an orderly transaction of the property to the everlasting receiver.
The duties of the everlasting receiver shall presently be restricted to: (a) sustaining and managing communications by the receivership web site, which was posted instead of the previous My Foreign exchange Funds web site; and (b) sustaining custody of the funds within the present receivership account. This shall be with out prejudice to the Events to hunt enlargement or discount of the scope of the everlasting receiver’s duties.
The CFTC notes that it has demonstrated a chance of future violations by the defendants that justifies preliminary injunctive aid. Defendants’ conduct was ongoing and systemic. Courts maintain that “the chance of future violations could also be inferred from previous infractions primarily based upon consideration of the totality of the circumstances to find out if the previous infraction was an remoted prevalence versus a sign of a scientific and steady sample of wrongdoing.”
Through the nearly two-year Related Interval, the defendants constantly engaged in fraud in reference to retail foreign exchange and retail commodity transactions by Merchants International, acted as an RFED with out registration, and executed off-exchange retail commodity transactions. Merchants International efficiently solicited at the very least 135,000 clients, and acted as counterparty to at the very least 24,000 clients in retail foreign exchange or retail commodity transactions. Within the absence of preliminary injunctive aid, Defendants are prone to resume their conduct.