On September 28, 2020, the U.S. Commodity Futures Trading Commission filed a civil enforcement action against Laino Group Limited (which did business under the name PaxForex) a company registered in St. Vincent and the Grenadines. The CFTC’s complaint charges the defendant with engaging in unlawful retail commodity transactions and failing to register as a futures commission merchant (FCM).
According to the complaint, from at least March 2018, PaxForex offered or engaged in unlawful retail commodity transactions in litecoin, bitcoin, ether, gold and silver. The defendant violated the Commodity Exchange Act by failing to conduct these transactions subject to the rules of a board of trade that had been designated or registered by the CFTC as a contract market.
The complaint further alleges that PaxForex, through its employees and agents, acted as an FCM by soliciting and accepting orders for retail commodity transactions. Additionally, the defendant acted as the counterparty for these transactions and extended credit or accepted money, securities, and property in the form of bitcoin and other assets in exchange for margin trades or contracts. Despite acting as an FCM, the defendant failed to register with the CFTC as required.
The complaint also said defendant uses its YouTube channel as a means of soliciting U.S. customers through a promotional video that instructs customers on how to open a trading account. In addition, the PaxForex website has customer testimonials from two U.S. investors, and, according to the complaint, purports to have a U.S. presence with its IT infrastructures being deployed in New York, among other places.
As a specific example, according to the complaint, “When one of defendant’s agents was contacted by an individual who identified himself as a U.S. customer, defendant’s agent actively solicited that individual in this district by email, and by phone through a U.S. phone number, to transact in CFDs referenced to the prices of foreign currencies, precious metals, and digital assets on defendant’s platform,”
The CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act.