CFTC Dealt Blow in Retail Commodity Transactions Case
On Tuesday, a Central District of California court dismissed the CFTC’s complaint against Monex Credit Company, et al., 17-01868, rejecting the CFTC’s controversial “actual delivery” argument set forth in CFTC v. Hunter Wise Commodities, LLC, 749 F3d 967, 970 (11th Cir. 2014). The CFTC, argued that Monex allegedly failed to actually deliver precious metals to its customers because the metals purchased in financed transactions were held in third-party depositories and were not under the customers’ control, and Monex could liquidate the customers’ positions in the company’s sole discretion, without notice, if the customers did not meet margin calls. The court found that Monex’s agreements with the depositories satisfied actual delivery.
Interestingly, the Hunter Wise rationale is the basis for the CFTC’s “Interpretation on Virtual Currency ‘Actual Delivery’ in Retail Transactions.” The effect of this is unclear at this time for those in the retail commodity or virtual currency transaction business.
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