## Facts

- John Psimenos, a Greek citizen and resident, opened a discretionary commodities trading account with E.F. Hutton & Co., a Delaware corporation headquartered in New York.
- Psimenos dealt primarily with a Hutton agent in Athens and later with personnel connected to Hutton’s Paris office.
- He alleged Hutton’s agent solicited his account by representing it would be managed conservatively and in compliance with applicable commodities regulations.
- Psimenos instructed that funds be invested conservatively, but alleged Hutton’s agents instead placed high-risk speculative trades, causing substantial losses.
- After the account was transferred to Paris, Psimenos ordered trading stopped, but later resumed trading after assurances that a new manager would recover losses.
- Psimenos alleged the purported manager was represented as a Hutton employee and commodities broker but was not registered as a commodities broker with the Commodity Futures Trading Commission.
- Although most communications and personal dealings occurred abroad, Psimenos alleged that many disputed contracts were executed on U.S. commodity exchanges, often through Hutton’s New York facilities, generating commissions for Hutton.
- Psimenos sued under the Commodity Exchange Act (CEA) antifraud provisions and also asserted common-law claims.

## Issues

1. Whether federal subject-matter jurisdiction exists under the CEA’s antifraud provisions when much of the alleged fraudulent solicitation and account management occurs abroad, but the scheme is materially carried out through trades executed on U.S. commodity exchanges and through a U.S.-based brokerage.

## Decision

- The Second Circuit reversed the district court’s dismissal of the CEA claim for lack of subject-matter jurisdiction and remanded.
- The court held that the CEA may apply where substantial conduct within the United States directly furthers the alleged fraudulent scheme, even if many communications and the investor’s dealings occurred abroad.
- On a motion to dismiss, the court accepted the complaint’s allegations as true, including allegations that U.S. exchange transactions were integral to the scheme.

## Legal Principles

- The CEA’s antifraud provisions can reach transnational fraud when substantial acts in the United States directly further or implement the fraudulent scheme, including execution of the challenged trades on U.S. commodity exchanges.
- The foreign citizenship of the plaintiff and the foreign locus of many misrepresentations do not, by themselves, defeat CEA jurisdiction when U.S. market activity is a material component of the alleged fraud.
- At the pleading stage, jurisdictional dismissal is improper where the complaint plausibly alleges domestic trading conduct that is not merely incidental but necessary to accomplishing the fraud.

## Conclusion

The court reinstated the CEA antifraud claim because the alleged scheme depended in significant part on commodities transactions executed in U.S. markets through a New York-based broker, making the United States conduct sufficient to support federal jurisdiction despite the case’s foreign elements.


Psimenos v. E.F. Hutton & Co., 722 F.2d 1041 (2d Cir. 1983)