UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND
|)||Press Release 4195-98:|
|COMMODITY FUTURES TRADING COMMISSION||)|
|1155 21st Street, N.W.||)||COMPLAINT FOR A|
|Washington, D.C. 20581,||)||PERMANENT INJUNCTION,|
|)||OTHER EQUITABLE RELIEF,|
|)||AND CIVIL MONETARY|
|NOBLE WEALTH DATA INFORMATION SERVICES,||)|
|INC., a/k/a NOBLE WEALTH, INC., a/k/a||)|
|NOBEL WEALTH, INC.,||)|
|4650 East-West Highway, Suite 250||)|
|Bethesda, MD 20814||)|
|INTERNATIONAL ADVANCED INVESTMENT, INC.||)|
|4650 East-West Highway, Suite 250||)|
|Bethesda, MD 20814||)|
|(Montgomery County), and||)|
|ESFAND BARAGOSH, a/k/a ESFANDIAR BARAGOSH||)|
|101 Grosvenor Place, No. 1513||)|
|Rockville, MD 20852||)|
|NOBLE WEALTH DEVELOPMENT, LTD.||)|
|Park in Commercial Centre||)|
|56 Dundas Street||)|
|Kowloon, Hong Kong, and||)|
|BULL & BEARS, LTD. a/k/a BULL & BEARS||)|
|INTERNATIONAL INVESTMENT, LTD.||)|
|182 Church Road||)|
|Willesden, London, NW109NP||)|
1. From at least August 1994 to the present, defendants Noble Wealth Data Information Services, Inc. ("Noble Wealth") and Esfand Baragosh ("Baragosh") have operated an office at which traders buy and sell foreign currency futures contracts. However, their operation is a sham through which they induce members of the general public to invest and they then systematically misappropriate customer funds and issue phony account statements. So-called "traders," who Noble Wealth solicits through classified advertisements, attend a brief training program during which they are taught the rudiments of currency trading and are urged to open accounts for themselves, friends and family. Noble Wealth and Baragosh, both orally and in written brochures, misrepresent to traders and their customers (together referred to as "customers" or "Noble Wealth's customers") the potential profits associated with Noble Wealth's currency investments and the expertise of its affiliates and "investment consultants."
2. The defendants claim that trades are placed through Noble Wealth Development, Ltd. ("Noble Wealth HK") a Hong Kong corporation, and through the Macau subsidiary of Bull & Bears, Ltd. ("Bull & Bears"), a British company. However, Noble Wealth's bank records indicate that the bulk of customer funds are used to pay operating expenses, personal expenses, and salaries and commissions. Although every few weeks Noble Wealth wires flat sums of money to a bank account in Hong Kong, these wires do not correspond with trading that is purportedly occurring in Noble Wealth's customers' accounts. Only a fraction of the money that Noble Wealth wires to Hong Kong is ever returned to the United States or to Noble Wealth's customers.
3. Defendants' misappropriation of customer funds and fraudulent misrepresentations and false statements violate Section 4b(a)(i)-(iii) of the Commodity Exchange Act, as amended (the "Act"), 7 U.S.C. § 6b(a)(i)-(iii). Moreover, because customer orders have not been placed on a bona fide exchange, defendants have bucketed customer orders in violation of Section 4b(a)(iv) of the Act, 7 U.S.C. § 6b(a)(iv). Finally, because Noble Wealth's foreign currency transactions are futures contracts that are not being consummated on or subject to the rules of a designated contract market, they also violate Section 4(a) of the Act, 7 U.S.C. § 6(a).
4. Accordingly, pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1, plaintiff Commodity Futures Trading Commission (the "Commission") brings this action to enjoin the defendants' unlawful acts and practices and to compel their compliance with the Act. In addition, the Commission seeks disgorgement of the defendants' and relief defendants' ill-gotten gains, restitution to customers of damages proximately caused by the defendants' law violations, civil monetary penalties and such other relief as this Court may deem necessary or appropriate.
5. Unless restrained and enjoined by this Court, defendants are likely to continue to engage in the acts and practices alleged in this Complaint and similar acts and practices, as more fully described below.
JURISDICTION AND VENUE
6. The Act establishes a comprehensive system for regulating the purchase and sale of commodity futures contracts and options. This Court has jurisdiction over this action pursuant to Section 6c of the Act, 7 U.S.C. § 13a-1, which provides that whenever it shall appear to the Commission that any person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of the Act or any rule, regulation, or order promulgated thereunder, the Commission may bring an action against such person to enjoin such practice or to enforce compliance with the Act.
7. Venue properly lies with this Court pursuant to Section 6c(e) of the Act, 7 U.S.C. § 13a-1(e), because the defendants and relief defendants are found in, inhabit, or transact business in this District, and the acts and practices in violation of the Act have occurred, are occurring, or are about to occur within this District, among other places.
8. Plaintiff Commission is an independent federal regulatory agency which is charged with the administration and enforcement of the Act, 7 U.S.C. §§ 1 et seq., and the regulations promulgated thereunder.
9. Defendant Noble Wealth Data Information Services, Inc. ("Noble Wealth") was incorporated in California on February 16, 1993. Noble Wealth's principal place of business is 4650 East-West Highway, Suite 250, Bethesda, Maryland 20814. Noble Wealth previously maintained offices at 303 N. Glenoaks Blvd., Suite 770, Burbank, California 91502 and at 3125 Presidential Parkway, Suite 115, Atlanta, Georgia 30340. Noble Wealth has also used the names Noble Wealth, Inc. and Nobel Wealth, Inc. Noble Wealth has never been designated by the Commission as a contract market for the trading of foreign currency futures contracts nor has it ever been registered with the Commission in any capacity. Since at least November 1996 until the present, Noble Wealth has transacted business in the District of Maryland.
10. Defendant International Advanced Investment, Inc. ("IAI") is a Virginia corporation with its principal place of business located at 4650 East-West Highway, Suite 250, Bethesda, Maryland 20814 -- the same principal location as Noble Wealth. IAI operates (or is about to begin operating) an office at which traders buy and sell foreign currency futures contracts. Since at least August 1998, IAI has solicited currency traders through classified advertisements in the Washington Post that are virtually identical to those placed by Noble Wealth. IAI has never been designated by the Commission as a contract market for the trading of foreign currency futures contracts nor has it ever been registered with the Commission in any capacity.
11. Defendant Esfand Baragosh a/k/a Esfandiar Baragosh ("Baragosh") is the manager of the day-to-day operations, is responsible for training traders, and is the registered agent for the Noble Wealth office located in Bethesda, Maryland. He also controls the bank accounts of Noble Wealth and IAI. Baragosh maintains a residence at 101 Grosvenor Place, #1513, Rockville, Maryland 20852. Until recently, Baragosh was also the manager of the day-to-day operations for the Noble Wealth office located in Atlanta, Georgia. Baragosh, who is not currently registered with the Commission, was previously registered with the Commission as an "Associated Person" of Liberty Futures, Inc. His registration was terminated as of October 5, 1995.
12. Relief defendant Noble Wealth Development, Ltd, ("Noble Wealth HK"), has received funds that can be traced directly to Noble Wealth's fraudulent activity and has been unjustly enriched through Noble Wealth's illegal enterprise. Noble Wealth HK was incorporated on December 29, 1992 in Hong Kong. Noble Wealth HK is located at Park In Commercial Centre, Room 1807-8, 56 Dundas Street, Kowloon, Hong Kong and Room 1801, Jubilee Comm. Building, 42-46 Gloucester Rd, Wanchai, Hong Kong. Noble Wealth HK has never been registered with the Commission in any capacity. Noble Wealth's promotional literature states that Noble Wealth HK is a "Licensed Financial Brokerage House with daily turnovers in excess of 100 million dollars." However, Noble Wealth HK is not a licensed foreign exchange broker with the Hong Kong Securities and Futures Commission.
13. Relief defendant Bull & Bears, Ltd. a/k/a Bull & Bears International Investments, Ltd. ("Bull & Bears") has received funds that can be traced directly to Noble Wealth's fraudulent activity and has been unjustly enriched through Noble Wealth's illegal enterprise. Bull & Bears became registered with the Companies House of the United Kingdom Financial Services Authority in December 1997. The firm claims to maintain its principal place of business at 182 Church Road, Willesden, London, NW109NP in the United Kingdom. On April 24, 1998, Noble Wealth wired $30,000 to an account at the Hong Kong and Shanghai Banking Corp. titled in the name of Bull & Bears. On May 8, 1998, Noble Wealth wired an additional $20,000 to this Bull & Bears account. Bull & Bears has never been authorized to conduct investment business in the United Kingdom.
A. Noble Wealth's Advertisements and Training Program
14. From at least November 1996 to the present, defendants Noble Wealth and Baragosh have operated an office in Bethesda, Maryland through which individuals they solicit buy and sell foreign currency contracts for themselves or for the accounts of their friends and families.
15. To lure investments from unsophisticated members of the general public, Noble Wealth places "help-wanted" advertisements in newspapers. A typical advertisement which routinely appears in the Washington Post claims: "Foreign Exchange co. is looking for several indivs. to be trained to become consultants. Excellent earning capacity." These advertisements do not identify the firm, but provide the phone number for Noble Wealth. Members of the public responding to these advertisements are invited to attend Noble Wealth's training program.
16. Noble Wealth's training program consists of four training sessions, each lasting from approximately one and a half to two hours, during which the instructors briefly explain the rudiments of the foreign currency market and different trading techniques. During the training, Noble Wealth instructors tell the new trainees or "traders" that Noble Wealth is affiliated with Noble Wealth HK, a venerable licensed financial institution located in Hong Kong which engages in daily transactions in excess of 100 million dollars.
17. During the training sessions, Noble Wealth instructors explain that Noble Wealth traders may trade for their own accounts or for the accounts of others. The Noble Wealth instructors encourage the traders to solicit friends and family to trade in foreign currencies through Noble Wealth, with a minimum deposit of $10,000 required for each account.
B. Noble Wealth's Misrepresentations
18. During the training sessions, Noble Wealth instructors explain that investors are likely to earn high profits trading with Noble Wealth in a short period of time because of volatility and fluctuations in the foreign currency market. When soliciting potential customers, the traders make similar claims that Noble Wealth's investments are highly profitable. Moreover, to assist the traders in soliciting prospective customers, the Noble Wealth instructors, including Baragosh, provide the new traders with Noble Wealth's brochures and telephone scripts. One Noble Wealth brochure that traders are instructed to show, and do show, to potential customers includes the following misrepresentations:
a) the "profit potential in foreign currency trading is very high due to the daily fluctuation and volatility of the market itself and to the leverage available because of minimal margin requirements. A profit of over thirty percent can often be made in only a few days time as we will show in the example below"(example depicts investor earning a return of 31.15% on an investment of $5,000);
b) Noble Wealth Development Limited, "incorporated in Hong Kong, is a Licensed Financial Brokerage House with daily turnovers in excess of 100 million dollars;" and
c) trading accounts will be managed by "highly trained investment consultants."
19. In fact, all or virtually all of Noble Wealth's customers lose a substantial portion of their money investing with Noble Wealth. While Noble Wealth reports that declining balances in customer accounts are caused by trading losses, spread fees, daily interest fees and commissions charged by Noble Wealth, these charges and losses are fictitious. Noble Wealth does not execute trades on the foreign currency markets for customers. Rather, as described below, Noble Wealth misappropriates the majority of customer money. Moreover, Noble Wealth HK is not a licensed foreign exchange broker with the Hong Kong Securities and Futures Commission. Finally, Noble Wealth's traders are not "highly trained." Noble Wealth allows new traders to begin trading after completing a four session training program -- amounting to less than a single, eight-hour day -- that is limited to an explanation of the rudiments of the foreign exchange market.
C. Noble Wealth's Marketplace for Trading Foreign Currencies
20. When the new traders complete the four training sessions and raise $10,000 for their own accounts or solicit at least $10,000 from individual customers, they are permitted to trade through Noble Wealth's facilities. Noble Wealth's operation is an organized in-house foreign currency trading facility that provides for the pricing, placing and execution of Noble Wealth's foreign currency futures contracts.
21. Noble Wealth's operation is organized and operated according to its own rules and regulations:
a) Noble Wealth establishes the trading hours for its facility. The trading day at Noble Wealth lasts from 8 p.m. to 3 p.m. the following day. The trading week lasts from Sunday evening to Friday afternoon.
b) Noble Wealth determines the composition of the currency contracts that are traded at its facility. Noble Wealth's facility offers contracts in four major foreign currencies denominated against the U.S. dollar: Deutschemarks, Swiss Francs, Japanese Yen and British Pounds.
c) Noble Wealth dictates the sizes of the contracts to be traded. The Deutschemark, Japanese Yen and Swiss Franc contracts are traded in increments of $100,000 and the British Pound contract is traded in increments of $50,000.
d) Noble Wealth offers leveraged foreign currency contracts and establishes the initial margin requirements for its contracts -- $1,000 for day trades and $2,000 for trades held open for more than one day. If the market moves against a customer's position, Noble Wealth requires customers to restore the equity in their accounts by making margin payments.
e) Noble Wealth also determines the potential duration of the contracts. Noble Wealth allows the contracts to be held open indefinitely. A customer may offset a position -- i.e., close the initial position -- by entering into a transaction that is opposite of the initial trade. For example, if a Noble Wealth customer bought a Yen contract, then the customer would offset that transaction by selling a Yen contract.
D. The Mechanics of Placing Trades through Noble Wealth's Marketplace
22. The trading floor at Noble Wealth consists of rows of computer monitors set up on tables at which traders are seated. On its trading floor, Noble Wealth provides trading desks, telephones, computers, news services, market data information and physical access to the Noble Wealth dealer. As described below, the Noble Wealth dealer is the means through which Noble Wealth's contracts are placed and executed.
23. From the perspective of the Noble Wealth trader, a foreign currency trade placed at the Noble Wealth trading facility is executed as follows:
a) When a trader wishes to place a trade, the trader must watch the computer monitors located on the trading floor at the Noble Wealth facility for the price of the currency to be traded.
b) When the trader sees a desirable price, the trader fills out a Noble Wealth order ticket describing the number of contracts to be bought or sold, the foreign currency to be traded, the price reflected on the computer monitor and whether the order is a stop-loss or limit order.
c) After completing the order ticket, the trader brings the ticket to the dealer who is located in the dealing room of the Noble Wealth facility. The dealing room is separated from the trading floor by a glass window.
d) The trader slides the order ticket under the window to the dealer.
e) The dealer then claims to place a telephone call to Noble Wealth HK to receive a price quote. The dealer relates the price quote to the trader.
f) The trader then has a few seconds to decide whether to execute the trade. If the trader accepts the price, the dealer completes the order ticket by filling in the execution price for the trade.
24. Noble Wealth claims that when its dealer calls Noble Wealth HK, Noble Wealth HK matches or offsets the trades of Noble Wealth's customers against each other. To the extent that Noble Wealth HK cannot match certain trades, Noble Wealth claims that every half hour, Noble Wealth HK contacts Bull & Bears, to enter into foreign currency transactions that are the opposite of those not matched. In other words, if during a half hour period Noble Wealth HK receives orders for the purchase of 200 contracts ("long contracts") for Yen and orders for the sale of 100 contracts ("short contracts") for Yen, Noble Wealth claims that Noble Wealth HK will match 100 of the contracts against one another and then sell an additional 100 short contracts through Bull & Bears.
E. Misappropriation of Customer Funds
25. Between June 1996 and April 1998, Noble Wealth's Maryland office deposited the funds of Noble Wealth's customers into accounts located at Mellon Bank and Crestar Bank in Maryland. Between August 1994 and March 1995, Noble Wealth's Georgia office deposited the funds of Noble Wealth's customers into accounts located at NationsBank in Georgia. The total amount of customer funds deposited during this period was at least $1,800,000.
26. Noble Wealth tells its customers that their money will be used to purchase foreign currency contracts. The funds paid by Noble Wealth's customers are not actually used to purchase foreign currency contracts. During the time periods described in Paragraph 25 above, Noble Wealth did not directly purchase foreign currency on behalf of its customers.
27. Noble Wealth also did not purchase foreign currency contracts on behalf of its customers through its transfers of funds to Noble Wealth HK. Instead, the transfers merely represent the defendants' funneling of funds offshore. During the time periods described in Paragraph 25 above, Noble Wealth transferred at least $765,000 to Noble Wealth HK. These transfers do not represent purchases of foreign currency contracts because:
a) The transfers to Noble Wealth HK were made in flat sums and do not correspond to the dates that customers invested money and began trading with Noble Wealth.
b) There are long periods of time during which customers invested money but no transfers were made to Noble Wealth HK. For example, from April 30, 1997 to November 18, 1997, Noble Wealth's Maryland office received more than $140,000 from investors but did not transfer any money to Hong Kong.
c) When customers were required to invest additional money to meet "margin calls," the money was deposited into the Noble Wealth accounts in the United States and there were no corresponding transfers of money to Noble Wealth HK.
d) When customers withdrew money from their accounts, there were never corresponding transfers of money back from Noble Wealth HK.
e) Of the money that was transferred to Noble Wealth HK, only a small amount was transferred back from Noble Wealth HK to Noble Wealth.
28. Instead of using customer funds to purchase foreign currency contracts, the defendants have misappropriated the majority of these funds. During the time periods described in Paragraph 25 above, Noble Wealth paid: at least $460,000 in salaries, commissions and allowances; at least $290,000 for operating expenses such as rent, news services and commodity price quotation services; at least $56,000 for personal expenses of Noble Wealth employees; and at least $765,000 to an account in Hong Kong in the name of Noble Wealth HK.
F. Bucketing of Customer Orders
29. Customer orders have not been placed on a bona fide futures exchange, nor are customer orders executed competitively.
30. Noble Wealth claims to match customer orders. Moreover, Noble Wealth's customer agreement states that "[Noble Wealth] may take the opposite position to my/our order, whether on [Noble Wealth's] account or on behalf of other customers of [Noble Wealth] in any jurisdiction."
G. Sale of Illegal Off-Exchange Futures Contract
31. The foreign currency contracts offered and sold through Noble Wealth are futures contracts. The contracts contain the two essential characteristics of futures contract--little or no anticipation of delivery and the ability to offset the transaction. Noble Wealth's customers who purchase a foreign currency contract do not actually receive the foreign currency, nor do they have any expectation that they will receive the foreign currency. Instead, Noble Wealth tells customers that they can speculate on the prices of foreign currencies by purchasing foreign currency contracts through Noble Wealth and then by entering into off-setting contracts which extinguish their initial foreign currency contracts. For instance, traders and customers who purchase a contract to buy a long Yen contract will extinguish their obligation to take delivery by offset-- purchasing a short Uen contract.
32. Noble Wealth's foreign currency contracts exhibit other characteristics which have been associated with futures contracts:
a) The terms of delivery, rules for margin calls, and other terms and conditions of Noble Wealth's foreign currency contracts are standardized. Noble Wealth offers contracts in standardized currency amounts - for example, $100,000 of Deustchemarks or $100,000 of Yen. Standardization of the terms of the contracts allows customers to close their positions by executing offsetting transactions.
b) The Noble Wealth contract is a leveraged contract whereby customers pay a down payment or margin payment for each contract (initial margin). Noble Wealth requires initial margin of $1,000 in the daytime and $2,000 during evening trading and additional payments when the value of the currency moves against the customers' positions (maintenance margin).
c) Noble Wealth's customers do not have any commercial need for the currencies in which they are purportedly investing. Their sole objective is to profit from fluctuations in the price of the currencies.
33. At no time have the contracts offered and sold by Noble Wealth been transacted on or subject to the rules of a board of trade that has been designated by the Commission as a "contract market" for trading currency futures.
34. The defendants have operated as a board of trade without receiving Commission designation as a contract market.
VIOLATIONS OF THE COMMODITY EXCHANGE ACT
VIOLATIONS OF SECTION 4b(a)(i) - (iii) OF THE ACT:
MISAPPROPRIATION OF CUSTOMER FUNDS AND FRAUD
35. The allegations set forth in paragraphs 1 through 34 are realleged and incorporated herein by reference.
36. Beginning in August 1994 or earlier and continuing to the present, defendants, in or in connection with orders to make, or the making of, contracts of sale of commodities for future delivery, made, or to be made, for or on behalf of any other persons, where such contracts for future delivery were or could be used for the purposes set forth in Section 4b(a) of the Act, 7 U.S.C. § 6b(a), ("Section 4b") have: (i) cheated or defrauded or attempted to defraud other persons; (ii) willfully made or caused to be made to other persons false reports or statements thereof, or willfully entered or caused to be entered for other persons false records thereof; and (iii) willfully deceived or attempted to deceive other persons, all in violation of Sections 4b(a)(i)-(iii) of the Act, 7 U.S.C. §§ 6b(a)(i)-(iii).
37. Beginning in August 1994 or earlier and continuing to the present, defendants have misappropriated customer funds in violation of Section 4b(a)(i) and (iii) of the Act, 7 U.S.C. § 6b(a)(i) and (iii). The defendants have used customer funds to pay salaries, commissions, allowances, operating expenses, and personal expenses, and to funnel money to bank accounts in Hong Kong in the names of Noble Wealth HK and Bull & Bears. Moreover, Defendants have issued false reports to customers that serve to hide the defendants' misappropriation of customer funds, in violation of Section 4b(a)(ii) of the Act, 7 U.S.C. § 6b(a)(ii).
38. Defendants have also engaged in a wide range of misrepresentations concerning facts that are material to the investments decisions of customers and potential customers in violation of Section 4b(a)(i) and (iii) of the Act, including but not limited to:
a) false representations of the likelihood for achieving profits from trading with defendants;
b) false representations that Noble Wealth HK is a "Licensed Financial Brokerage House" in Hong Kong; and
c). false representations that customer accounts will be managed by "highly trained investment consultants."
39. Defendants have misappropriated customer funds, made false misrepresentations, and issued false statements, knowing that their statements and actions were false and misleading and intending, by their representations and actions, to cheat or defraud customers and traders.
40. Baragosh as manager of the Noble Wealth's Maryland office, directly or indirectly controlled Noble Wealth; and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations described in this Count One. Pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c(b), therefore, defendant Baragosh is liable for violations of Section 4b(a)(i) - (iii) of the Act, as described in this Count One.
VIOLATIONS OF SECTION 4b(a)(iv) OF THE ACT:
BUCKETING OF CUSTOMER ORDERS
41. The allegations set forth in paragraphs 1 through 40 are realleged and incorporated herein by reference.
42. Beginning in August 1994 or earlier and continuing to the present, defendants, in or in connection with orders to make, or the making of, contracts of sale for future delivery, made, or to be made, for or on behalf of other persons, have bucketed such orders, or have filled such orders by offset against the orders of other persons, or have willfully and knowingly and without the prior consent of such persons, have became the buyer in respect to the selling orders of such persons or became the seller in respect to the buying orders of such persons, in violation of Section 4b(a)(iv) of the Act, 7 U.S.C. § 6b(a)(iv).
43. Baragosh as manager of the Noble Wealth Maryland office, directly or indirectly controlled Noble Wealth; and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations described in this Count Two. Pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c(b), therefore, defendant Baragosh is liable for violations of Section 4b(a)(iv) of the Act, as described in this Count Two.
VIOLATIONS OF SECTION 4(a) OF THE ACT:
OFFER AND SALE OF COMMODITY FUTURES CONTRACTS NOT
CONDUCTED ON OR SUBJECT TO THE RULES OF A BOARD OF TRADE
WHICH HAS BEEN DESIGNATED BY THE COMMISSION
AS A CONTRACT MARKET FOR SUCH COMMODITY
44. The allegations set forth in paragraphs 1 through 43 are realleged and incorporated herein by reference.
45. The foreign currency contracts offered and sold by defendants are contracts for the purchase and sale of commodities for future delivery, commonly known as futures contracts.
46. The foreign currencies which are the subjects of the futures contracts offered by the defendants are commodities as defined by Section 1a(3) of the Act, 7 U.S.C. § 1a(3) (1994).
47. Beginning in August 1994 or earlier and continuing to present, defendants have offered to enter into, entered into, executed, confirmed the execution of, or conducted business for the purpose of soliciting, accepting any order for, or otherwise dealing in any transaction in, or in connection with, a contract for the purchase or sale of a commodity for future delivery when: (a) such transactions have not been conducted on or subject to the rules of a board of trade which has been designated by the Commission as a "contract market" for such commodity; and (b) such contracts have not been executed or consummated by or through a member of such contract market; in violation of Section 4(a) of the Act, 7 U.S.C. § 6(a).
48. Baragosh as manager of the Noble Wealth Maryland office, directly or indirectly controlled Noble Wealth; and did not act in good faith or knowingly induced, directly or indirectly, the acts constituting the violations described in this Count Three. Pursuant to Section 13(b) of the Act, 7 U.S.C. § 13c(b), therefore, defendant Baragosh is liable for violations of Section 4(a) of the Act, as described in this Count Three.
DISGORGEMENT OF THE ASSETS OF THE RELIEF DEFENDANTS
49. The allegations set forth in paragraphs 1 through 48 are realleged and incorporated herein by reference.
50. Defendants have committed a fraud upon Noble Wealth's customers in connection with the purchase and sale of commodity futures contracts as alleged herein.
51. Noble Wealth HK and Bull & Bears have received funds or otherwise benefited from funds that are directly traceable to the funds obtained from defendants' customers through fraud.
52. Noble Wealth HK and Bull & Bears are not bona fide purchasers with legal and equitable title to the customers' funds, and Noble Wealth HK and Bull & Bears will be unjustly enriched if they are not required to disgorge the funds or the value of the benefit they received as a result of defendants' fraud.
53. Noble Wealth HK and Bull & Bears should be required to disgorge the funds or the value of the benefit they received that is traceable to defendants' fraud.
54. By reason of the foregoing, Noble Wealth HK and Bull & Bears hold the customers' funds in a constructive trust for the benefit of the customers.
WHEREFORE, the Commission, respectfully requests that this Court, as authorized by Section 6c of the Act, 7 U.S.C. § 13a-1, and pursuant to its own equitable powers, enter:
a) a permanent injunction prohibiting the defendants and any other person or entity associated with them, including any successor thereof, from engaging in conduct violative of Sections 4(a) and 4b(a)(i)-(iv) of the Act, and from engaging in any commodity-related activity, including soliciting new customers or customer funds;
b) an order directing the defendants and relief defendants and any successors thereof, to disgorge pursuant to such procedure as the Court may order, all benefits received from the acts or practices which constituted violations of the Act, as described herein, and interest thereon from the date of such violations;
c) an order directing the defendants and relief defendants to make full restitution to every customer whose funds were received by them as a result of acts and practices which constituted violations of the Act, as described herein, and interest thereon from the date of such violations;
d) a civil penalty on each defendant in the amount of not more than the higher of $100,000 or triple the monetary gain to that defendant for each violation of the Act or Regulations committed prior to November 27, 1996, or $110,000 or triple the monetary gain to that defendant for each violation of the Act committed after that date; and
e) such other and further remedial ancillary relief as the Court may deem appropriate.
Respectfully submitted, ________________________ Lawrence H. Norton Associate Director for Enforcement Gary Dernelle, Esq. Daniel R. Salsburg, Esq. David Berry, Esq. Dated: October 7, 1998 Commodity Futures Trading Commission Division of Enforcement 1155 21st Street, N.W. Washington, D.C. 20581 (202) 418-5000 (ph) (202) 418-5523 (fax)