## Facts

- The CFTC brought an enforcement action against Monex entities and principals based on a leveraged retail precious metals program (“Atlas”).
- Under Atlas, retail customers purchased precious metals on margin, paying part of the price while Monex financed the remainder.
- The CFTC alleged Atlas functioned as an unregistered leveraged retail commodity transaction market outside authorized venues and registration regimes.
- The complaint alleged that in most transactions Monex (or a Monex-selected depository) held the metals; customers did not obtain possession, and the metals remained under Monex’s exclusive control.
- The CFTC alleged customers’ interests were contingent on Monex’s financing and margin terms, leaving customers without a substantial, non-contingent interest in the metals.
- The CFTC also alleged deceptive sales practices, including misrepresentations and omissions regarding risk, margin calls, and Monex’s control over customer positions.
- The district court dismissed the complaint, concluding (1) the “actual delivery” exception removed Atlas from the CFTC’s retail leveraged jurisdiction and (2) CEA § 6(c)(1) and Rule 180.1 did not authorize stand-alone fraud claims absent manipulation.
- The CFTC appealed.

## Issues

1. Whether the CEA’s “actual delivery” exception for leveraged retail commodity transactions is an element the CFTC must plead and negate, or an affirmative defense the defendant must prove; and what “actual delivery” requires.
2. Whether CEA § 6(c)(1) and CFTC Rule 180.1 authorize CFTC enforcement actions for stand-alone deceptive conduct (fraud) without alleging market manipulation.

## Decision

- The Ninth Circuit reversed the dismissal and remanded.
- The court held the “actual delivery” exception is an affirmative defense; the CFTC need not plead the absence of actual delivery to state a claim.
- The court held “actual delivery” requires transfer of some degree of possession or control to the customer; alleged book-entry arrangements where the dealer retains exclusive control do not satisfy the exception at the pleading stage.
- The court held CEA § 6(c)(1) and Rule 180.1 reach deceptive conduct as well as manipulation, allowing stand-alone antifraud enforcement claims without alleging market manipulation.

## Legal Principles

- A statutory exception that carves out transactions from a broad jurisdictional grant may operate as an affirmative defense, placing the burden on the defendant to prove the exception applies.
- For leveraged retail commodity transactions, “actual delivery” within the statutory period requires a transfer of some degree of possession or control to the customer; mere recordkeeping changes while the dealer retains exclusive control are insufficient.
- CEA § 6(c)(1) prohibits use of any “manipulative or deceptive device or contrivance” in connection with covered commodity transactions; the disjunctive language authorizes claims based on deception alone.
- CFTC Rule 180.1, modeled on SEC Rule 10b-5, supports enforcement against fraudulent or deceptive acts or practices without requiring allegations of market-wide manipulation.
- On a motion to dismiss, a complaint is evaluated under plausibility standards; affirmative defenses generally do not support dismissal unless established on the face of the complaint.

## Conclusion

The Ninth Circuit reinstated the CFTC’s claims, holding that “actual delivery” is a defendant-borne affirmative defense requiring a real transfer of customer possession or control, and that CEA § 6(c)(1) and Rule 180.1 authorize stand-alone antifraud enforcement actions even without alleged market manipulation.


United States Commodity Futures Trading Comm’n v. Monex Credit Co., 931 F.3d 966 (9th Cir. 2019)