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On Wednesday, September 6, the Commodity Futures Trading Commission (CFTC) filed a civil injunction against three associated precious metals trading companies and the father and son partners who run them. The three companies, based out of Newport Beach, California, are Monex Deposit Company, Monex Credit Company, and Newport Services Corporation. Michael Carabini and his father, Louis Carabini, are also charged. The CFTC filed the injunction in the U.S. District Court for the Northern District of Illinois.

The suit alleges that Monex and its affiliated companies and agents defrauded customers of “hundreds of millions of dollars”. According to Enforcement Director James McDonald, the case against Monex represents “one of the largest precious metals fraud cases in the history of the Commission.”

Specifically, the company is accused of selling its “off-exchange” Atlas leveraged precious metals trading service to customers as a safe and reliable way to invest in gold, silver, platinum and palladium despite the fact that it operates entirely outside of the regulatory system of exchanges established and required by the Commodity Exchange Act of 1936 (which the CFTC exists to enforce) and the Dodd-Frank Act of 2010, and despite total Atlas retail customer losses between July 16, 2011 and March 31, 2017 of more than $290 million USD. This averages to about $4 million in losses per month.

Commodity Futures Trading Commission EmblemAt no point, the CFTC suit alleges, did Monex inform potential customers of these losses. Instead, the company and its agents overstated the profits that could be earned through participation in their Atlas program. “High pressure” sales tactics allegedly were also employed.