Acting in tandem, both the Federal Bureau of Investigation and the Commodity Futures Trading Commission (CFTC) brought charges against Laino Group Limited, which operates the FX retail brand PaxForex.
The charges, filed by the CFTC in a Texas district court, against the St. Vincent and the Grenadines-based firm included engaging in “unlawful retail commodity transactions,” as well as breaking other trading and registration rules.
, which had no physical presence in the US, allowed traders from the country and elsewhere to trade gold and silver, as well as cryptocurrencies including ether, litecoin, and bitcoin. As such, it acted as a futures commission merchant (FCM) and a a contract market without being registered to do so.
After the charges were filed, the https://paxforex.com/ domain was seized by the FBI according to an announcement on the company’s website.
Extra-territorial reach for US regulators and courts
The scheme had been running from March 2018 to present and allegedly had violated the and agency rules in connection with soliciting and accepting orders for retail commodity transactions.
Likewise, PaxForex illegally acted as the counterparty for its clients’ transactions, extended credit or accepted money and securities. The company also allowed investors to fund a margin account with bitcoins and other assets to then open leveraged positions in other asset classes. Because the transactions were not executed on a national exchange, PaxForex violated the federal securities laws.
Absent certain exceptions, which do not apply to PaxForex, the US laws require that companies offering such products to be registered with the SEC and that the transactions be executed on a registered national exchange.
The CFTC has asked the court to provide full restitution, disgorgement of ill-gotten gains and to pay the appropriate civil monetary penalties. In addition to fiscal claims, the agency seeks permanent registration and trading bans and a permanent injunction from future violations of federal commodities laws.
Despite the charges against PaxForex are brought amidst the multi-year crackdown against , the latest enforcement essentially boils down to plain old-fashioned securities and commodities violations. The case is also another reminder of the extra-territorial reach of US authorities as offshore firms offering to local customers are subject regulatory and criminal penalties
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