U.S. Commodity Futures Trading Commission v. Southern Trust Metals, Inc. et al

Filing 122

ORDER Granting Partial Summary Judgment. Signed by Senior Judge James Lawrence King on 4/7/2016. (jw)

UNI
TED STATES DI
STRI CO URT
CT
SO UTH ERN DI
STRI O F FLO RI
CT
DA

CASE NO .1 C V4- 22739- I
K NG
U. COM M ODI FUTURES TRADI G
S.
TY
N
COM M I ON ,
SSI

Pl ntf,
ai if

S
OUTHE T TMETALY l ,
RN RUS
NC.

LORELEY OVERSEA S CORPOM TI ,
ON
a ROBERT ESCOBI
nd
O,

D e e nt .
f nda s
O RD ER G M NTI PARTI L SUM M AR Y JUD GM ENT
NG
A

THI CAUSE i be or t Cour upon De e nt Sout m Tr t M e al, l .
S
s f e he
t
f nda s
he
us
t s nc ,

Lo ee Ov r e sCo po ai n a Ro r Es o i ' M o in f rSu r J gme t (
r ly e s a r r to , nd bet c b o s to o mmay ud n DE
6 ) a Plitf U.
6 nd an if S.Co dt Fu u e Tr dig Co s in' (he i mmiso '
mmo iy t r s a n
mmiso s t t
co s in'
)
M oin fr S
to o umma y J d me ( 6 )1 Th Co l h ad o a a g me t o te
r u g nt DE 8 . e u' e r r l r u n n h
t
Com m ison' moton att Pr TralConf r nc o J nua y 7,2016.
si s i
he e- i
ee e n a r
1I
. NTROD UCTI
ON

The Co an ( 1 a lge t tDee d n s S ut r Tr s M eas n .(i
mplit DE ) le s ha f n a t o hen u t tl,I c k
ST
Meaf' a Lo ee Ov re s Co p r to (dw r ly',b and t ough t r ofi r ,
t l ) nd r ly e s a r o ain i o ee ' y
l
)
hr
hei fce s
z pl yee , a a nt , i udi Def nda Robe tEs obi oper ed a s he e i whih
m o s nd ge s ncl ng
e nt
r c o,
at
c m n
c

De e
f ndan s defa
t
r uded r t i c t e s i c
e a l usom r n onneci wih ilga , of- xc nge, fna ed
ton t le l fe ha
i nc

'
The Cour ha a tonaly c i ed t pari r pe i St t e sofFa t , and t
t s ddii l onsder he tes es ctve a em nt
cs
he
r pons and r plest e h m o i
es
es
e i o ac
ton.

pr ci m e a sta ac i , i v oai n o s ci n 4() 4b a ( )A) ( , C) 4 ,a 6 c
e ous t l r ns tons n i lto f e to s a , ( )2 ( , B) ( , d nd ( )

o heCo dt Ex h n eAc (h $ t) 7U. C.j 6 a , 6 a ( )A) ( ,( ,6 ,a d
ft
mmo iy c a g t t e $ ' , S. j ( ) b( )2 ( , B) C) d n
Ac '
9( 1 ) a Co si n Re u ain 1 0.( ) 1 C. R. l 0.( )( 3) The Compl nt
20 2 , nd mmiso g lto 8 1a , 7 F. j 8 1 a 201
ai
.

f t ale t tDef ndant ST M e al and Es o vi at d t A c by a tng a a f ur
urher l ges ha
e
s
t s
cobi ol e he t c i s ut es

c mmo iyme c a t(i ' wih u b ig r gsee wiht eCommiso
o dt r h n i
FCM' t o t en e itr d t h
)
s in.
Co 1 a lgest tDef nda s ST M e al a Lor e vi a e t Ac by oferng
unt le
ha
e nt
t s nd
el y ol t d he t
f i

,

e erng i o,and e c i of- ha fna cd r t i c m odiy ta a tons. De e nt
nt i nt
xe utng fexc nge i nc e a l om
t r ns c i
f nda
Es o i a l
cobi s legedl labl f ST M eal a Lor ly' a tonsa a c r lng per on ofST
y i e or
t s nd
ee s c i
s ontoli
s
M e asand Lor l
tl
eey.

Co
unt 1 ale s t t De enda ST M e a s m ade i e i l a knowi
1 l ge ha
f
nt
tl
nt ntona nd
ng

m ir pr e a i t c t e s i of - xc nge tna d r t i c m odiy ta ac i .
s e es nt tons o us om r n f e ha
s nce e a l om
t r ns tons
Def
endantEs o i ale dl la e f ST M e a s a i as a c r lng pe s of ST
cobi s lge y i bl or
t l ' ctons
ontoli
r on
M eas
tl.

Co I1 al ge t tDef nt ST M et l f t rvi a ed Com m ison Regulton
unt I le s ha
enda
a s urhe olt
si
ai

1 0 1 a b e lyi gde e tvede ie i t eta a to r fre t i Co n 1 De e a t
8 .( ) y mp o n c p i v c s n h r ns cins e er d o n u t . fnd n
Es o i al ge y la ef ST M tt l a tonsasacontoli pe s ofST M et l .
cobi s le dl ibl or
as' c i
r lng r on
as
CountI a l
V legest tDef ntST M e as f t r vi aed t Actby aci as a
ha
enda
t l urhe ol t he
tng
n

F
CM ( y 1 o frng a d e e u ig fn nc dr t i c mmo iy ta a to sa 2)a c ptn
b ) fe i n x c tn i a e eal o dt rns c in nd c e i g
mo e f ra plcn f ur so d r )wih u ben r gitr d wi t Co s i n a a
n y o nd a i g ut e r e s t o t i g e se e t he mmiso s n
h
FCM . ef
D endantEs o i al ge y labl f ST M e a s a i asa c r lng per on of
cobi s le dl i e or
t l ' ctons
ontoli
s
ST M et s
al .

A.TheCom m i son' M oton f Sum m ar Judgm e
si s
i or
y
nt

l i moi n,t Co s in s e s
n t to he mmiso e ks umma y j dg n s ll a t la l y o
s
r u me t o ey s o ibii n
t
Count1 a ns ST M e al,Lor e , a Es o,a ast la lt on Count1 , a i tST
, gai t
ts
el y nd cobi nd o ibiiy
V gans

M e al and Es obi a gui t undiput d f c s s
ts
c o, r ng he
s e a t how t Def nda s e
hat e nt ngaged i of
n f

-

e nge tna d c m odiy tans c i wih r t i cusom e s a ac pt d a pl ce
xcha
i nce om
t r a tons t e a l t r nd ce e nd a d
f t e or r wihoutbe ng r gi t e a a FCM .
u ur s de s t
i e ser d s n
B.Def
endant M oton f Sum m ar Judgm ent
s'
i or
y

l t ermoi n, f n n Es o o s e s mma yj d nta t e r eam r ie
n h i to De e da t c bi e ks u r u gme s o vey li as d
i t Co lit a Dee d n s ST M eas a d Es o o s e s
n he mp an nd f n a t
t l n c bi e k ummay j g n a t
r ud me t s o
V
he
antz f
nt c o r
he
s i n s r ed . , ha t
CountI oft Compl i . De enda Es obi a guest Com m is o i ba r , ie. t ti
s ul be equiabl esopped,fom pur ui a c am sa i thi pur ua t t t r of
ho d
t y t
r
s ng ny l i gans m
s nt o he e ms

a s tlme t a r e n DE 67 25 e c td b t e M r Es o i a d So t e n Tr t
ete n g e me t(
- ) xe u e ewe n . c b o n u h r us
S c rte , nc ( c i n tap ry t t a o -t e a to o o ha a t eNai n l
e u iis I . whih s o a t o he b ve syld cin) n ne nd nd h to a

Fu u e Asocain (i ' o t ohe h n De e a t S M easa d Es o o a g e
t r s s ito 1
NFA' n he t r a d. fnd n s T t l n c bi r u
)
t tCountI f l bec e ST M e as'of - xc nge Gna
ha
V ais aus
t l fe ha
nced r t i comm odiy t a ac i
eal
t r ns tons
do notf l i o t pur e oft Comm i son' a hort due t a e e i f
a l nt he vi w
he
s i s ut iy
o n xc pton ound i t
n he
Ac ,a i ca tbe f
t nd t nno
ound t ha o her s ac ed asa FCM bec e no oft a ount
o ve t wie t
n
aus ne he cc s
a ST M e al w e e ope d f t pup os ofta ng f ur ,a t ef e ST m e al di not
t
ts r
ne or he
e r di ut es nd her or
ts d
ac pta m one f f ur or r .
ce ny
y or ut es de s

7 e e d n s mo ins e s mma yj d me ta t a1 fn a t o Co n I , b tte
D fn a t' to e ks u r u g n s o 1Dee d ns n u t V u h
al gai ofCountI co e n onl De e nt ST M eal a Es obi .
le tons
V nc r
y f nda s
t s nd c o

I .BACK G RO UND
I

Thef l ng f t a eundiput by t pari :
olowi ac s r
s ed he tes
ST M e as l t i Cor lGa es Fl i i awholyt l, oca ed n
a bl , orda, s
l owned s i a y ofLor e ,
ubsdir
ely

a'rts Vig nIln c p o ai n. 6 a ! ( 9 30 Lo ee i t r i awho l o d
B iih r i sa ds o rto DE 9, t ! 2 - . r ly,n u n,s
ly-wne
s bsdir o S u h r Tr tSe u i e Holi Co n (il l ig Co n ', nohe
u i ay f o t e n us c rt s dng mpa y s o dn mpa y' a t r
i
l
)
Fl i c
orda ompa f Robe tEs obi wasCEO , diecor and t lr s i vi
ny. #.
r c o
r t ,
he a ge t ndi dual

s e de oft Hol ng Compa durng a ltm esr l va t t sca e. 1 !31
har hol r he di
ny i l i
e e nt o hi s d. .
Durng t pt i ofJ 2011t ough Aprl201 ST M e al m a ke ed a s d
i he rod une
hr
i
3,
t s r t nd ol
i sm en si pr i m et l s a gol s l r a pltnum . DE 6 a ! 1 S M ea s
nve t t n ec ous a s uch s d, ive , nd a i
9, t . T t l
ofe e t t
fr d wo ypesofm et si t e st c t e s. Thetr tt , whih i nota is i
al nvesm nt o usom r
i s ype
c s
t s ue n
t se e i ved c t e spa ng i f la up-r f pr i m et l . DE 8 !2 Th
hi as , nvol
usom r yi n ul nd font or ec ous as
4 . e
s ond t i ved ST M et sac ptng m oney and o de sfom c t e st i ti
ec
ype nvol
al ce i
r r r
us om r o nves n

p e iusmeaso ama gne o lvea dba i. 6 a ! 1 Thi s c n t p , ee r dt
r co
tl n
r i d r e rge ss DE 9, t J . s e o d y e r fre o

b t tCo sin a t eI T Measlvea d measpr g a 'i t s j c ofCo t 1
y h mmiso s h '
S
tl e rge t l o r m, s he ub e t
'
un s
a I oft Com m is on' Compl nt I i addii l undiput t tST M e al pl ed
nd V
he
si s
ai . t s
tonaly
s ed ha
t s ac
f ur s a optonsor r w ih UK tr o be fofce ti cle s and t sc
ut e nd i
de s t
s ms n hal
ran i nt ,
hi onduc i alo
ts s

tes b e to Co n 1 I . 21 2.
h u j c f u t V. d T -2
W he a c t e pl ed a or rw ih ST M e al f l ve a m e al,ST M e al
n us om r ac n de t
t s or e r ged t s
t s'

e o e wo dta se t c some ' mo e t Lo ee 1 ! 1 Lo ee i t r , ul
mplye s ul r n fr he u t rs n y o r ly. d. 6. r ly,n u n wo d
ta se temo e t et rHa t cGlba M ak t , d.i- n e ' o- r ee Fu u e
r n fr h n y o i
he n e o l r e s Lt (il t c' lBe k ly t r s
la
)
L d.i r ly' , r ST M eas e o e wo dplc ta e e re po ig t
t (i kee ' whe e
Be
)
t l' mplye s ul a e r d s o r s ndn o
. t erpostons. #.Ha ee a Be kely a em a gi t a ng tr sl t i t UK . 1
z om
us
ii f
nt nd r e r
r n r di l m ocaed n he
d.
;T M e al alo plced or r f c
S
ts s a
de s or omm odiy f ur f c rai c t e s I . 21 2
t ut es or e t n usom r . d ! - 2.
4

Thos or r we epl ed by ST M e a sa Be kely;Be kely t n pl ce t e or r on a
e de s r ac
tl t r e
r e he a d hos de s
U . f ur sexc nget ough a a fla e 1 !2
S. ut e
ha
hr
n fii t . d. 3.
On M a c 28,201 Es o a Sout n Tr tSe ii , I c (i S c rte ' ,
rh
4, cobi nd
her us curtes n . i
ST e u iis'
)
a t rwholyno he
l owned s i a y oft H ol ng Com pany, ent r d i o as tlm entwih t
ubsdir
he di
e e nt e te
t he

N FA,t prva e s l-egul t y or ni ton f t f ur i ty. DE 78 a ! 81 ST
he i t e fr a or ga za i or he ut es ndusr
,t .
Se urtesw a a mem be oft NFA,a Es o w a r ser d w ih t NFA a a
c ii
s
r ht
nd cobi s egit e t he
s n

as oc a e per on. The s tl m e r ol d cha gesby t NFA t tEs obi a ST
s itd s
ete nt es ve
r
he
ha c o nd
Se ii sha vi a e e t i mem be r e :Rul 2- , f ope a i a unr se e f ur
curte d ol t d eran
r uls
e 4 or r tng n egit r d ut es

c m i son m e c nt ie. ST M e al'a Rul 2- f f lng t r por c t e
om s i
r ha , . ,
t s, nd e 5, or aii o e t usom r
c pl nt a ns a c r an br r 1 TheNFA s te e cont i a r ea e sa i t t
om ai s gai t e t i oke . d.
etl m nt
aned el s t tng ha
t s tl mentwoul i es vea t r i t a lcompl nt ,i tga i a a t .' D E
he ete
d s ol nd t m na e l
r
ai s nvesi tons nd udis '

67 a ! 3 Th Co si nwa n tapa t t t es tlme t Se DE 6 , t ( 8. e mmiso s o
ry o h ete n . e
7 25.
1 1 LEGAL STANDARD
1.

Su r j g n i a pr p it wh r t e pla n s a s ppo tn mae il
mmay ud me t s p o rae e t h e dig nd u rig tras
esa ih t tt r i no ge ne is as t a m a e i f c a t tt movi pa t i
t bls ha he e s
nui s ue
o ny t ral a t nd ha he
ng ry s

e ild t j g n a amatro lw,Se Fe R. v P. 6; l e Co p. . r t, 77
nt e o ud me t s te f a
t
e d. Ci . 5 Ceotx r v Catet 4
U. 31 3 2 ( 98 .l t r c r a awh l c ul no la ar to l a ttn e t fn f r
S. 7, 2 1 6) f he e o d s
o e o d t e d aina f c-i d r o i d o
t nonmovi pa t t r i no ge ne is off c f ti . See M atus t El . I
he
ng ry, he e s
nui s ue a t or ral
s hia ec ndus
.

Co. . n t Ra oCop.47 U. 5 4 5 7( 9 6)
v Ze ih di r , 5 S. 7 , 8 1 8 .
The m ovi pa t bea st bur n ofpoi i t t pa toft r cor t ts
ng ry r he de
ntng o he r
he e d ha howst
ht
a e e ofa ge ne is ofm aera f . Se Adi e v. S. Kr s & Cb. 398 U. 1
bs nc
nui s ue
t i l ad
e ck s
H. es
,
S. 44,

1 7 ( 9 0) Ale v T s n Fo ds I . 1 1 F.d 6 2,6 ( 1h Ci. 1 97 . Onc t e
5 1 7 ; ln . y o o , nc, 2 3 4 46 1 t r 9 )
eh
m ovi pa' e t bls st a ence ofa ge ne i ue ofmat ralf ct t bur s fst
ng ly s a ihe he bs
t
nui ss
e i a , he den hit o
5

t nonmovi pa t t go beyond t pl di a desgnae is cii f t s
he
ng ry o
he ea ngs nd
i t 'pe tc ac s howi t t
ng ha
t r i a genui is f ti . Ce otx, 477 U . a 324.se alo Chanel I v Ialan
he e s
ne s ue or ral' l e
'
S. t , e s
, nc. . t i

Acie aro a,I c, F.d 1 2 47 ( 1h Ci.1 )( l ig t tt no mo n
t we fFl. n .931 2 47 ,1 7 1 t r 991 ho dn ha ht n vig
v
pa t m us icome f wa d w ih sgnii nt pr tve evi nc de onsr tng t e sence
ry
ti
or r t i fca , oba i
de e m ta i he xit

ofatibeis o fc .)
' ra l s ue f a t' .
'

Onamo in f rs
to o ummayj d n ,h c u t s viw t ee i e ea r s l al
r u gme tt e o r mu t e h v d nc nd e ove l
i e enc i t lghtm os f vo a et t nonmovi pa t . SeeAnde s v. be t
nf r es n he i
t a r bl o he
ng ry
r on Li ry

Lob y I c, 77U. 2 , 5( 98 ) we e , me es itlao e d n ei s p r o
b , n .4
S. 42 25 1 6 .Ho v r a r cn il f vie c n u po t f

t en n vigpa t spo iin i i u fce tt d fa amo in f rs mma yj d n .S e
h o mo n ry' sto s ns fi in o e e t to o u r u gme t e
i a 252. I t e denceofe e by t nonm ovi pa t i m e el c or bl ori not
d. t
f he vi
fr d
he
ng ry s r y ol a e s

sg ic n l p o ai , ummayj d me i p o r S ei a 2 9 0.
ini a ty r b tve s
r u g nt s r pe . e d. t 4 -5
I DI
V. SCUSSI N
O
A.De e
f ndantEs o' Setl entwih t NFA
cobi s tem
t he

Def nda Es obi a guest tt Com m ison' cl m sa i thi a e bare by t
e nt c o r
ha he
s i s ai gans m r
rd
ht

s te e he e e ed i o wih t NFA i M a ch of201 The s tem e s a es i e ala,
etlm nt nt r nt t he
n r
4.
etl nt t t , ntr i

t e ( a i jPa lsa c ptn eoft sOfe o Sete e ts l o r t
h He rng ne' c e a c
hi fr f tlm n hal pe ae
t ba a f t r M gmbej Rls o i lt Agto o g- a i g Pa e
o r ny u u e e r e p nsbii
yl cinj r l e rn l n l
l
Co li sa an tg fnd n lf a y c nd c o c rig pro t t d t of
mp ant g is Dee a t or n o u t c u rn i r o he ae
t sOfe ofSetl
hi f r
tement ofwhih NFA ha c por t knowl
,
c
s or a e
edgt
gnd t e
a )h
gla igj Pa ls a c p a c o t i Ofe of Sete n s alr s v a
le rn
ne ' c e tn e f h s fr
tlme t h l e ole nd
. . .

. . .

t nni t a1 c
e na e 1 ompl nt ,i si tons a a t r l tng t t , whi h ar
ai s nve tga i
nd udis e a i o hem
c e
pe ng a oft da e oft sOfe ofSe te ent....
ndi s he t
hi f r
tlm

DE 6 - 5 a !K. ep rist t s tlme ta eDe e a tEs o o ST Se u iis a t
7 2 , t ( Th a te o he ete n r fnd n c bi ,
c rte , nd he
NFA.DE 67- lr pec i oft f tt tt Comm ison i nota pa t t t s tem e ,
25. res tve he ac ha he
si s
ry o he etl nt

Def nda a guest tt N FA i t S or e e a m ' oft Com m i son, t
e nt r
ha he
s he s
enf c m nt r ' he
s i he
Com m ison w a a a eoft s tl nt t Comm i son idi not ng t dicour M r
si
sw r
he e teme , he
s i k d hi o s age .
6

Es obi sunde sa ng t the wasi f d s tlng alinvesi tons'wih r gult sa i
c o'
r t ndi ha
n a eti l i tga i
t e a or nd n

f c d dmuc t e c u a eig 'a De e da tEs o or le o h se pe tto t tt e
at i
h o n o r g t, ' nd fn n c bi eid n i x c ain ha h
q
s te e woul t r i t a1 c pl i sand i si tonsa i thi , a s t
etl m nt
d e m na e l om ant
nve tga i
ga ns m nd o he
s tl e mus a y t bart Com m ison' pr ec i oft sac i SeeD E 66
etem nt t ppl o
ht
s i s os uton hi ton.

( mp ssi o ii l.
e ha i n rgna)
Def nda a gue t tt lngua oft s tementa i t ba t i t a ton
e nt r s ha he a
ge he etl
pples o r he nsant c i
be ng br
i
oughtby t Com m i son, ,a t m a i y, ha t Comm i son s d beequia y
he
s i or le tvel t t he
s i houl
t bl
e t d fom brngi t saci
soppe r
i ng hi ton.Bot a gum e sf l W hieD e enda poi st va i
h r
nt ai.
l f
nt nt o rous

comm uni tonsbew e NFA a t Com m is on ase dencet tt y s r
ca i
t en
nd he
si
vi
ha he ha ed
i tgai m aera sa ot r s coor naed t re f t t r i no hi unl wf
nvesi tve t i l nd he wie
di t hei fors, he e s t ng a ul

aboutt r gult s s rng i si tvei or aton a s h s rng doesnotbi onet
wo e a or ha i nve tga i nf m i nd uc ha i
nd
o

s tlme sma b t o he . eGr a v S 2 2F.d99 ,1 0 ( C. r 2 00 ; e
ete nt de y he t r Se ah m . EC, 2 3 4 0 7 D. Ci. 0 ) s e
J z J e v S 11 F.d 1 7 ,11 9( t Ci.1 97 .
/o on s . EC, 5 3 1 3 7 4 h r 9 )
ç
TheCoul fndst tt s tl nti notbi ng a ns t Com m is on f t
' i ha he e teme s
t
ndi gai t he
s i or he

f lo n r a o s 1 De e a tha f i dt a d c a y e de c t dip t Pli ifs
o lwig e s n : ) fnd n s al o d u e n vi n e o s u e antf
e
e de e t tt N FA i aprvae i ty s fr gult y a nc whi consiut no pa t
vi nc ha he
s i t ndusr el- e a or ge y, ch
tt es
r

o t g venme to t eCo s i n 2 t eCommiso i n tapa t t t es tlme t
f he o r n r h mmiso , ) h
s in s o
ry o h ete n ,
a d 3 c u t ha ec sse ty h l t a s tlme t wih s l-e u ao y a nce d n tb r
n ) o rs v on itn l ed h t ete n s t efr g lt r ge is o o a
s eque cl m sby gover
ubs nt ai
nmen r gult s e n f t s econduc , ee eg. Jones 115
t e a or , ve or he am
ts , . ,
,
F. at 11 M or
3d
79.
eover w ih r s tt hi es oppelar ent t onl e de of
, t e pec o s t
gum , he y vi nce

de rm e alr inc i Es o' s fs r ng deposton t s i ony t the t
ti nt ela e s cobi s el- e vi
ii e tm
ha
houghtt
he
s tl e woul pr cl a1 f ur e or e e a tons a t e i no evi nc whi
etem nt
d e ude 1 ut e nf c m nt c i , nd her s
de e ch
s
uggesst sbele wasr s bl unde t cic sance I
t hi i f
ea ona e
r he r um t s. ndee t Com m is on has
d, he
si
7

a
dduce e de e s
d vi nc howi t tEs o w asawa et Com m i son w a pl nni t brng is
ng ha cobi
r he
si
s a ng o i t
o e -r em e a i Es obi scouns m ade sa emcnt t NFA or l a i wrtng
wn nt c nt cton, c o'
o
el
tt
so
aly nd n ii
e es i couns ' expectton and unde sa ng t ta Com m is on enf c e ac i
xpr sng
els
ai
r t ndi ha
si
or em nt ton

woul f l t NFA s tlm ent a Es obi scouns contnued t pr
d olow he
e te
, nd c o'
el i
o oduce docum e si
nt n
r pons t t Com m ison' r quessw ihoutpr es ,e n afe t N FA s tlm entwas
es
e o he
si s e
t t
ot t ve tr he
e te
sgned.DE 78-1 Ex. ;DE 78- Ex. .
i
, C.
2, K

Ac o dngy, fnd n s mo in,ot ee t n t a i s e s mmayj g n i
c r i l De e a t' to t h x e t h tt e ks u r ud me t n
ri
elanceupon Def nda Es obi ss tl e wih t N FA ac i a a bart t sac i , i
e nt c o' etem nt t he
tng s
o hi ton s
de e
ni d.

B.Countl- Engagi i Of - hange Fi
ng n f Exc
nance R e ai C om m odiy Tr actons
d t l
t
ans i

TheCo s in mo e f rs mmayj dg n o Co n lo t eCo an , ih
mmiso v s o u r u me t n u t f h mplit wh c
alg st a De e a t 'lve a e measp o r m vi ae s cin 4 a o t Ac. ci n
le e h t fnd n s e r g d t l r g a olt s e to ( ) f he t Se to
4 a p o ie t ti s al u lwf f ra y p ro t e tri t o o f rt e trit ,
( ) r vd s ha t h lbe n a ul o n e s n o ne no, r fe o ne n o a
c r tf t pur eors eofa c m odiy f f ur delver unl ss h contac i
ontac or he chas
al
om
t or ut e i y, es uc
r ts

e e u e o ors b e tt t er lso ar g se e e c a g . eCo si n' a t o iy t
x c t d n u j c o h u e f e itr d x h n e Th mmiso s u h rt o
e ur t tc
ns e ha omm odiy ta ac i oc on r a e e
t r ns tons cur egul t d xchangese endst coverfnance
xt
o
i
d,
m a gi d,orl ve a d c m odiy tans tonsw ih r t lcus omer ,defned a cusom er
r ne
e r ge om
t r aci
t e ai t
s i
s t
s

wihl s t n $1 milo i d sr to r ic meun e ma ge nt( r$5mil u e
t e s ha 0 lin n ic einay n o
d r na me o
li nd r
on

ma a e n,i t e a ee ga e i h d i ga tviis. U. C.j c ( )D)i() 7U. C.
n g me t f h y r n g d n e g n ci te ) 7 S. 2()2 ( ()I; S.
jl l8)
at .
W hie i i undiput t tt y e ge i of- xe nge fna ed r alc m odiy
l ts
s ed ha he nga d n fe ha
i nc et i om
t

ta a to , fnd n sa g t t hec mm o i ta a to sa is aen ts b e t o
rns eins De e a t r ue ha t o dt r ns ci n t sue r o u j c t
y
s ci n4()du t t S cu l lv r 'e e in f u i s c in2( )2 ( . rua tt
e to a e o he û t a deie y' xc pto o nd n e to c ( )D) Pu s n o
a
8

s cin 2 c ( ( , rns ci n wh c r s ti a t a deie y o t u d ryngc
e to ( )2)D) ta a to s ih e ul n cu l lv r f he n e l i ommodt
iy

wë i 2 d y o t e c to d t aen ts b e t o s cin 4 a . a l ei e y
t n 8 a s f he xe u in ae r o u j c t e to ( ) The dua d lv r
h
e pton i an afi i def ns and t bur n t pr isa i biiy lesw ih
xce i s
fnnatve e e
he de o ove t pplca lt i
t

Dee a t. eFT v M o t nS t 3 4U. 3 44 45( 9 )
fnd n s Se C . ro al, 3 S. 7, - 1 48 .
Def nda sc e t tt UK tr t ough whih t y pl ce t com m odiy
e nt ont nd ha he
l ms hr
c he a d he
t
ta ac i t delve y ofphys c pr ci m et son behal ofDef ndant 'c i s
r ns tons ook i r
i al e ous al
f
e
s lent
t ough de ior ba i t UK . a ntf poston i t tt r w e e nevera physca
hr
post y nks n he
Pl i ips ii s ha he e r
ny
i l
m eal de i ed t a
t s lver o nyone,and t tDef nda swe em er y s c a i i physca m et l
ha
e nt r
el pe ul tng n
i l as
f ur s,de pie r es i ot r iet t rcle s
ut e
s t epr entng he w s o hei int .
The r or demonsr t st tDe enda se e ed i o fnance c m odiy
ec d
t a e ha f
nt nt r nt i
d om
t
tans ctonswih r t i cus omer ,and t tt s l r ge c m odiy ta ac i we enot
r a i
t eal t
s
ha he e eve a d om
t r ns tons r
ta on any e
r ded
xcha
nge.DE 69- Exs 3,4;DE 69- Exs 5,6;DE 69- Ex.7;DE 693, .
4, .
5,
6,
Ex.8;DE 69- Exs.10,11,1 And,f t i pa t D e endant ha f ied t adduc a
7,
3.
or her r , f
s ve a l o
e ny
e de e ofac ualdelver ofa physca gol r a ed t t s fna ed com m odiy
vi nc
t
i y
ny
i l d elt o he e i nc
t
ta ac i .
r ns tons

The ef e,Def nda shave f l t esa ih t i bur ofpr ng a ualdelve y
r or
e nt
aied o t bls he r den
ovi ct
i r

ofm e al t plce f t rlver ged m e a scusom e s and t Com m ison i entted t .
t s ook a or hei e a
tl t r,
he
s i s il o

s
ummayj g n a t la lt o Co n 1
r ud me t s o ibii n u t .
y
C.CountI - Actng asan FCM wihoutRe s er ng asan FCM
V
i
t
git i

Th pa t sb t mo f rs mma yj d n a t Co tl whih al g st a ST
e ri o h ve o u r u gme t s o un V, c le e h t
e
M e al ac e a a FCM wihouttr tr se i w ih t Com m ison,i vi a i of
t s td s n
t
s s egit rng t he
s i n ol ton
s ton 4d oft A c ,a t tDef nda Es obi i la e f ST M e a s adi asa
eci
he t nd ha
e nt c o s i bl or
t l ' ons
c r lng pe s of ST M et s
ont oli
r on
al .

The Ac de i a FCM asaper on oror ni a i t ti e ge i s i ii or
t fnes n
s
ga z ton ha s nga d n olctng

ac ptng or r f c
ce i
de s or omm odii orcomm odiy f ur ,a who a pt m oney,s urte ,
tes
t ut es nd
cce s
ec ii s
o pr ry t m a gi gua a ee ors c e a ta orc r t t tr ul t r r .7
r ope t o r n, r nt , e ur ny r des ontac s ha es t he efom

U. C. j 1a 2 . eCo si a g e ta i h se tb ih dDe e a sS M easa
S.
() 8 Th mmison r u s h t t a sa ls e fnd nt T tl nd

Es o i v o ae t Ac t o g u a ul a tnga a FCM b 1 a c p ig o d r f r
e b o i ltd he t hr u h nlwf l ci s n
y
y: ) c e tn r es o

t o fe c a g rt i c mmo t ta s cinst a a etes b e to Co nt a d 2
he f-x h n e eal o di r n a to h t r h u j c f u 1 n )
y
a eptng m one a or sf t pur ha e ors e ofcom modiy f ur sand optons
cc i
y nd der or he c s
al
t ut e
i .

Ase tte t a e g g di t ta a to t ta et es j c o Cou t1 Dee a t
n iis h t n a e n he r ns cins ha r h ub e t f n , fnd n s
we e r r d t ha r se e w ih t Comm i son a FCM S l i undiput t t
r equie o ve egit r d t he
si s
.ts
s ed ha
D e e nt a enotr s e ed wih t Com m ison a FCM S Acc di y,i i beyond
f nda s r
egit r
t he
si s
. or ngl t s
diput t tD e e nt ha ac e i vi a i ofs ton 4d oft A c ,and t Comm isi
s e ha f nda s ve t d n olton
ec i
he t
he
s on

i a diin lye tte t s
s d to al n ild o umma yj d me ta t la ly o Co n 1
r u g n s o ibii n u t V.
t
D. c bi' Co r lngPe s n Li biiy Unde Se to 1 b)
Es o o s nt ol
i
r o a lt
r c i n 3(

Th Co s in as s e s mmayj dg n o iscam f rc n r l ro
e mmiso lo e ks u r u me t n t l i o o to pe s n
la lt a i tEs o o u e s cin 1 ( )o t eAc, U. C. 1 c b) I o de t
ibii gans c bi nd r e to 3 b f h t 7 S. j 3 ( . n r r o
y

d mon taec nr l ro la lt t Co s inmus s w t a Es o o: 1 ha
e srt o to pe s n ibii he mmiso
y,
t ho h t c bi ( ) d
i n r l o to'o rt eprma yvilt r a d ( )lc dg d fih, rk wig yi u e
û e a c n r l ve h i r o ao ; n 2 a ke oo at o no n l nd c d
ge
'
t ac sc tt tng t vi a i CFFC v RlFiz r d ( Co.I ,31 F. 1 1 1
he t onsiu i he ol ton.
.
tge al f , nc. 0 3d 32 , 334

( lh Ci. 0 ) c r. e id, 4 U. 1 3 ( 00 ) Hu trWie 1F. p 3 a 1 2 2
1 t r 2 02 , e t d ne 5 3 S. 0 4 2 4 ; n e s , Su p. d t 3 2- 4.
i Es obi H ad G ener C ont olO ver ST M e al and Lore e
. c o
al
r
t s
ly

Ge r c r e s swhe et de e nti Sa ofs r f
ne al ontol xit
r he f nda s sn tce , ounde , i pa ,ort
r prnei l he
a horze si t y on t compa sba a ount . Hunt Wie,1 F.
ut i d gnaor
he
ny' nk cc
s'
'
er s
Supp. 3d a 1322t
2 The Com m ison ha adduce e dences i t Es o wast f
4.
si
s
d vi
how ng hat cobi
he ounde ofST
r
10

M e a s a wel a t f
t l , s l s he ounde ,CEO,diecor and lr ts r hol ri t Hol ng
r
r t ,
a ges ha e de n he
di
Com pa whih ownsbot ST M e a sand Lor e DE 69- Ex. DE 69- Exs 10,11,
ny, c
h
tl
ely.
6, 9;
7, .
M or ove , he Comm i son hasadduc e de t tEs obi had powe ofator y t ac
e rt
si
ed vi nce ha c o
r
t ne o t
on be fofST M e a sa Lor e DE 69- Ex.9;DE 69- Ex.10.Es obi wasa
hal
t l nd ely.
6,
7,
c o
sgna or t ST M e a sa Lor l y' ba a ount ,a had aut iy t t a f m oney t
i t yo
t l nd
e e s nk cc
s nd
hort o r ns er
o
orfom t e a ount DE 69- .Ex.1 DE 69- Ex. DE 69- Exs.l 17.Es o
r hos cc s.
1
)
6, 9;
7,
4,
cobi

ta le t London a opened Lor e smar n ta ng a ount a Hant a Ber ey,
r ve ld o
nd
ely'
gi r di cc
st
ec nd kel
and ha aut iy ove ta ng i t e a ount D E 69- Ex.7;DE 69- Ex.8;DE 69d hort
r r di n hos cc s.
5,
6,
6,
Ex.9;DE 69- Ex,1 M or r Es obi sof ew a on t s
7,
0. eove , c o' fc
s he ame foorasST M eal '
l
t ss

br r ;a l tone ST M e al e pl
oke s t eas
t s m oyeet tfed t the waspe s l hied by Es o;
esii ha
r onaly r
cobi
a t wr et Es o washi ç s'DE69- Ex.9;DE 69- Exs 1 1 13.
no her ot hat cobi
s û .'
bos
6,
7, . 0, 2,
Es o doesnotdiput t ef t ,buta guest thi pos- odd Fr nk i vem e
cobi
s e hes ac s
r
ha s tD
a nvol
nt
i ST M et s' l ver
n
al s e aged m e al busne swasS i m al' Thi m is t poi .
ts i s
l ni .' s s es he nt For
m
c r lng pe s la lt i he f
ontoli
r on i biiy, t ocusi upon t pow e t contol notwhehe t tpow e i
t
s
he
ro
r ,
t r ha
rs
a ualy e r s ' CFFC v Gi alarM one ar Cor , o.04- 32- V ,2006 W L
ct l xe cied.'
. br t
t y
p. N
801 CI

1 8 01 , t*1 - 9 ( D. a M a 3 , 00 ) a fd, 7 F. 11 0( 1h Ci. 0 ) I i
7 9 8 a 8 1 S. Fl. y 0 2 6 ,f ' 5 5 3d 8 1 t r 20 9 . t s
cl rf om t r r t tEs obi ha t powert contolST M e a s De e nt ofe no
ea r he eco d ha c o d he
o
r
t l . f nda s f r
evi
dencet t conta y.
o he
rr
i.Es o D i NotAc i G ood Faih
i cobi d
tn
t
l or rt es a i h a l k ofgood f ih,t Com m i s on m us dem onsr t t t
n de o t bls ac
a t he
si
t
t a e ha

Es bi f ied t m a nt n a i ea ona y adeq t s t ofs r s on a c r , or
eo o a l o i ai t s bl
r
ua e ysem
upe vii nd ont ol'
'
f ie t ove s et s t m wih Cr s bl dii nce. CFFC v.Hunt r W ie
a ld o r e ht ys e
t tea ona t lge '
'
e s

Co d t s LLC, F. up 3 1 7 1 5 ( D. a 2 4 . eCo iso s p rs
mmo ii ,
e
21 S p. d 31 , 3 0 S. Fl . 01 ) Th mm s in u po t

iseli wih t tm o fom Es o t tST M e al had no die t s of e s o m a ge s
t a m t esi ny r
cobi ha
t s
r c or , fc r , r na r ,
and no l orcom pla de r ment . 69- Ex.9;DE 69- Exs 1 1 1 Es bi
egal
i nce pa t
s DE
6,
7, . 0, 2, 4. co o

t sii t tt abs nc ofmanage e w a a delbe ae c c unde t ken pur ua t t
e tfed ha he e e
m nt s
i r t hoi e,
ra
s nt o he
a ceofc
dvi
ouns .DE 69- Ex.l Def nda sf lt a
el
7,
0. e nt ai o dducea e dence ofr ona y
ny vi
eas bl

ade t contol atST M e al.Def ndant a guet c r swe eunne s a y bec e
qua e
r s
ts
e
sr
hat ontol r
ce s r
aus
M r Nur
. moha e t d Es o t tHa ecwas'
m d ol cobi ha nt
s
Dodd- ark c pla .' ef nda s
Fr l om i nt'D e nt '
c r ulrr as ng f l t contove tt Com m ison' e dencet no s t m ofi e nal
ic a e oni ais o
r r he
s i s vi
hat ys e
nt r
c r se sed a ST M e al .
ontol xit t
t s
ii Es
i. cobi K no i y I
o
w ngl nduce ST M et s and Lore e sVi atons
d
al '
l y' ol i .
To e t ih knowi i
sabls
ng nduce e , he Ccom m is on m a s
m nt t
si
y how t tlt contoli
ha lhe
r lng
pe s had acua orc tuc i know l
r on
t l onsr tve
edge oft c eac i test c tt et
he or tvii hat onsiut he

vi a i a is a alowed t m t c i 'R. Fiz r d t Co. 31 F. a 1
oltons t s ue nd l
he o ontnue.' J tge al t
, 0 3d t 334.
TheComm i i poi st Es obi sown t tm ony t thewasa e durng t r l va
sson nt o c o'
esi
ha
war
i he e e nt
pe i t tST M e al wase ge i of- xc
rod ha
ts
nga d n fe hange lve aged com m odii sta ac i w ih
e r
te r ns tons t
r t i cusom er .DE 69- Ex. DE 69- Ex.1l TheComm i son alo poi st e ais
eal t
s
6, 9;
7,
.
si
s
nt o m l

s
howi t tEs bi e er f ur tadesf ST M e al scusomer ,and t Es o
ng ha co o nt ed ut es r
or
t s'
t
s
hat cobi
r ceve sa e ent fom Ha ecand Be ke e de aii t m a gi de i tvesa f ur
e i d ttm s r
nt
r l y t lng he r ned rva i
nd ut es
ta sm a by Lor e on be l ofST M e al sc t
r de
de
ely
ha f
t s' usomer .DE 69- Ex.1 Es o doe
s
7,
0. cobi
s
no diput t e f t ,butcl m st he s d notbe hel la ebec e hew a notawa e
t s e hes ac s
ai hat houl
d i bl
aus
s
r
t e t ans ctonsw er il .I
hes r a i
e legal gnor nce oft l w i no de e e,how e r a Es obi
a
he a s
f ns
ve , nd c o

c n ta o dla lt u e s ci 1 ( )b l l rt l o r c ls l a i ig k wld e
a no v i ibii nd r e ton 3 b y i i a ey r e ke sy vo dn no e g
y
de be
aboutpot ntalwr
e i
ongdoi 'H unt r Wi 1F.Supp.3d a 1
ng.'
e se,
t 32224.

12

TheComm i son hasadduc s fcintevi nc t tEs obi w a a c r pe s
si
ed ufi e
de e ha c o s ontol r on

wi i t me nngofSe to 1 ( ) a d Es o i h sf ie t c n r e tha e i nc .
t n he a i
h
c in 3 b , n c b o a ald o o tov r t t vde e The

Commiso smoi n f rs mmayj d n a t De e d ntEs o o' c n r ln pe s n
s in' to o u r u gme t s o f n a c bi s o tolig ro
la iiyu e s ci 1 ( i t r f r g a td a t Co n sIa I
ib l nd r e ton 3 b) s he eo e r n e s o u t nd V.
t
V .C O N C L U SI N
O

A c or ngl i i ORDERED AN D ADJU DG ED t Pl ntf COM M ODI
c di y, t s
hat ai if
TY

FUTURES TRADI COM M I ON' M oton f ParilSummar J
NG
SSI S i or ta
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nt DE
a t s e i, he e GR ANTED. Def nt ROBERT ESCOBI SOUTHERN
nd he am s r by
enda s
O,
TRUST M ETALS, I C. a LORELEY OVERSEAS CORPORATI ' M oton f
N , nd
ON S
i or

Stmmay J
l r udgme ( 66) be a t s me i,hee DENI
nt DE
, nd he a s rby
ED.J
udgme s l be
nt hal
ent r d s pa a e y i f vor of Pl i if COM M OD I
ee
e r tl n a
antf
TY

COM M I ON a agai tDe enda s SOUTHEM
SSI
nd
ns f
nt

FUTURES TRADI
NG

TRU ST M ETALS,I C. LORELEY
N ,

OVERSEAS CORPORATI
ON,a ROBERT ESCOBI a t CountI oft Com pl nt
nd
O so
he
ai ,
a a i tD e e nt SOUTHERN TRUST M ETALS,I C.and ROBERT ESCOBI a
nd gans f nda s
N
O s
t CountI oft Compl nt
o
V
he
ai .

DO NE AN D O RDERED i Cha be s Unie St t sD iti tCour f t Sout m
n
m r , t d a e src
t or he
he
D iti ofFl i ,t s7t da ofAprl 201
srd
orda hi h y
i, 6.
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ON ORABLE J M ES LA W RENCE
A
UN I
TED STA TE S D I
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cc:

Couns lofRe d
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13

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