Opinion
Case No. CV 02-1417 DT (MCx)
June 18, 2003
BERNARD J. BARRETT, LOUIS V. TRAEGER, EDWIN J, YOSHIMURA, COMMODITY FUTURES TRADING COMMISSION, Los Angeles, CA, for Plaintiff
AMENDED ORDER OF PERMANENT INJUNCTION AND OTHER RELIEF BY DEFAULT AGAINST REGO GAINER FINANCIAL, INC., REGO GAINER, INC. AND KWOK LUN LAM
This cause came for hearing on June 9, 2003, on application of the Plaintiff Commodity Futures Trading Commission ("CFTC") for entry of order of permanent injunction and other equitable relief and for civil monetary penalties by default against Defendants Rego Gainer Financial, Inc. ("Rego Gainer Financial"), Rego Gainer, Inc. ("Rego Gainer") and Kwok Lun Lam ("Lam"). Defendants Rego Gainer Financial, Rego Gainer and Lam did not appear. The Court having considered the complaint filed in this action, the arguments of counsel, and all the pleadings, filings, and proceedings herein, and there being no just reason for delay, this Court finds:
A. This Court has jurisdiction;
B. Venue properly lies with this Court;
C. Defendants Rego Gainer Financial, Rego Gainer and Lam received proper notice of this hearing;
D. There is good cause to enjoin Defendants Rego Gainer Financial, Rego Gainer and Lam from engaging in acts and practices which constitute or would constitute violations of Section 4(a) of the Commodity Exchange Act ("Act"), as amended, 7 U.S.C. § 6(a); and
E. There is good cause to enjoin Defendants Rego Gainer Financial, Rego Gainer and Lam from engaging in such acts and practices to prevent immediate irreparable loss and damage to customers and the general public and that, therefore, Plaintiff CFTC's application for entry of order of permanent injunction, other equitable relief and for civil monetary penalties by default against Defendants should be granted.
Therefore, this Court directs the entry of the following Order of Permanent Injunction and Other Equitable Relief and for Civil Monetary Penalties.
I. ORDER OF PERMANENT INJUNCTION
IT IS ORDERED THAT:
1. Defendants Rego Gainer Financial, Rego Gainer and Lam, their agents, servants, employees, successors, assigns, attorneys — in — fact, and any other person or entity in active concert or participation with Defendants Rego Gainer Financial, Rego Gainer and Lam who receives actual notice of this Order, by personal service or otherwise, are hereby permanently restrained and enjoined from directly or indirectly offering to enter into, entering into, executing, confirming the execution of, or conducting any office or business anywhere in the United States, Its territories or possessions, for the purpose of soliciting or accepting any order for, or otherwise dealing in, any transactions 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 or registered by the CFTC as a contract market or derivatives transaction execution facility for such commodity future, 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) (2001).
II. ORDER FOR OTHER EQUITABLE RELIEF
IT IS FURTHER ORDERED THAT:
2. RESTITUTION: Defendants Rego Gainer Financial, Rego Gainer, and Lam shall be jointly and severally liable to pay $463,467 in restitution to customers plus prejudgment interest of $33,791 for a total of $497,258. Post judgment interest shall accrue on the unpaid balance, from the date of this Order until Defendants' restitution obligation is paid in full, at the Treasury Bill rate prevailing on the date of this Order, pursuant to 28 U.S.C. § 1961(a).
3. The persons to whom restitution shall be paid are set forth on the "List of Customers", attached as Exhibit 2 to the Declaration of Deborah Boone in Support of Application For Entry of Order of Permanent Injunction and Other Relief By Default Against Rego Gainer Financial, Inc., Rego Gainer, Inc. and Kwok Lun Lam filed in this action. Each such customer shall be entitled to claim the amount of restitution set out on the "List of Customers" plus prejudgment interest and all post judgment interest that shall hereinafter accrue on the claim of each customer. Prejudgment interest is awarded from the date of the filing of the Complaint. Each investor is entitled to receive a share of the total prejudgment interest award proportionate to that investor's share of the total restitution award.
4. This Order determines the restitution obligation of the Defendants arising from the equitable action of the United States Commodity Futures Trading Commission. Omission from the List of Customers shall in no way limit the right of any customer to seek recovery from Defendants or any person or entity through another action or proceeding. Further, the amounts stated in the List of Customers shall not limit the right of any customer to prove in a different action or proceeding that a greater amount is due from Defendants or any other person or entity, and nothing herein shall be construed in any way limit or abridge the rights of any customer that exist under another statute or under the common law.
5. PAYMENT OF RESTITUTION: Restitution shall be paid as follows:
a. For purposes of restitution the National Futures Association PNFA") is hereby designated as the Monitor. Notice to the Monitor shall be made to Daniel A. Driscoll, Executive Vice President, Chief Operating Officer, or his successor, at the following address: National Futures Association, 200 West Madison Street, Chicago, Il 60606.
b. The Monitor is authorized to collect and distribute funds for purposes of restitution to customers. Defendants Rego Gainer, Rego Gainer and Lam shall make restitution as directed by the Monitor for distribution to those persons who lost money as a result of the deposit of funds with Defendants after December 20, 2000.
c. Each person or entity holding funds pursuant to the asset freeze provision of the Preliminary Injunction entered by this Court on March 5, 2002 is hereby authorized and directed to transfer all such funds and other assets to the custody of the Monitor immediately upon receipt of written transfer instructions from the Monitor.
d. Upon receipt of all frozen funds, the Monitor shall make an effort to contact those persons identified as having deposited funds after December 20, 2000 who have not previously been fully paid back by any Defendant for any such deposit.
e. The Monitor shall attempt to contact each such customer to verify the customer's current address and to obtain a statement under oath in a form acceptable to the Monitor from each customer that confirms all deposits, all withdrawals and the resulting "net loss" owed to each such customer. The net loss shall be the simple calculation of deposits after December 20, 2000 minus subsequent withdrawals without any adjustment for purported trading results or other account activity.
f. Thereafter, the Monitor shall disburse all the funds now frozen by order of this Court among the customers who can be located in proportion to each such customer's share of the total losses of all customers who can be located plus applicable interest.
g. The Defendants shall first pay the restitution award ordered by this Court. Upon receipt of any further payment of the restitution award of this Court by any defendant sufficient to justify the expense of a distribution, the Monitor shall make a further distribution in the following manner:
1) The Monitor shall first make a renewed effort to contact all customers with a net balance including all customers who were not located in the past.
2) The Monitor shall obtain the necessary confirmation of address, deposits and withdrawals from any newly located customer in the same manner described in paragraph e.
3) For the second and all subsequent distributions, the Monitor shall first pay restitution to each customer located since the last distribution so that all currently located customers have received restitution for an equal percentage of their net losses, plus interest.
4) The Monitor shall then make a further proportionate distribution to all customers who currently can be located.
h. The Monitor shall continue to make distributions in the same manner at any time assets sufficient to justify a distribution are received until all customers have been fully compensated in the amount of their losses including prejudgment and post judgment interest.
i. For purposes of identifying customers to be contacted for the distribution of restitution, and the amounts of deposits and losses to be confirmed by customers, the Monitor shall rely on the List of Customers that is Exhibit 2 to the Declaration of Deborah Boone.
7. CIVIL MONETARY PENALTY: After satisfaction of the Restitution obligation, including prejudgment interest and post judgment interest/ Defendants shall pay a civil monetary penalty of $262,698,
8. Any remaining funds held by the Monitor at the time that all customers have received full restitution, including interest, shall be transferred to the Commodity Futures Trading Commission, Division of Enforcement, 1152 21st Street, N.W., Washington, D.C. 20581 to the attention of Ms. Dennese Posey, in satisfaction of Defendants' Civil Monetary Penalty obligation. The payment(s) shall include a cover letter that identifies the Defendants and the name and docket number of this proceeding.
III.
IT IS FURTHER ORDERED THAT:9. This Court shall retain jurisdiction of this cause to assure compliance with this order of permanent injunction and other relief.