United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
ROSENTHAL CHIEF UNITED STATES DISTRICT JUDGE.
Waraich, representing himself, sued International Capital
Markets Propriety Limited and the National Australia Bank
Limited, alleging that International Capital Markets-an
Australia company that brokers transactions on the spot
foreign-exchange, or “forex, ” market through an
online trading platform-represented that it was a
“qualified forex dealer” complying with U.S. law,
despite failing to register as a “swap dealer”
with the United States Commodities Futures Trading
Commission. (Docket Entry No. 1 at 3); 7 U.S.C. §
6s(a)(1). Waraich alleges that International Capital Markets
asked its clients, including United States residents like
himself, to transfer the funds they intended to trade on the
foreign-exchange market to an account maintained by the
National Australia Bank. Waraich allegedly transferred about
$120, 000 into the account, money that Waraich lost in
transactions on the foreign-exchange market. Waraich asserts
a violation of the Commodities Exchange Act under 7 U.S.C.
§ 25(a) based on International Capital Markets's
failure to register with the Commission.
has moved to set aside the order dismissing the National
Australia Bank; for leave to amend his complaint to seek
punitive damages under Texas law and to assert claims against
the Commission for an alleged Administrative Procedure Act
violation; and for default judgment against International
Capital Markets. (Docket Entry Nos. 26-29, 31). After
carefully examining the complaint, motions, response, the
properly considered submissions, and the applicable law, the
court denies each of Waraich's motions. The reasons are
set out below.
August 2013, Waraich applied for a trading account with
International Capital Markets through its website.
International Capital Markets provided an “initial
notice” before Waraich began his online application.
The initial notice stated:
Unfortunately [Commission] regulation prevents U.S. residents
from trading with brokers outside the US[.] As [International
Capital] Markets is a regulated broker in Australia we are
required to comply with International and Australian
regulations[.] If you are a Qualified Eligible Participant
(QEP) as defined by [omitted by Waraich] you
may proceed with the application form, however[, ] you will
be required to complete a [omitted by
Waraich] which will assist us in assessing whether
you are eligible to trade with us.
(Docket Entry No. 26 at 22-23). Waraich proceeded to complete
a Qualified Eligible Person form with representations
indicating that he met the “Qualified Eligible
Person” requirements under regulations set at the time.
(Docket Entry No. 1-1 at 2-3); see 17 C.F.R. §
4.7(a)(1)(v), (3)(xi)- (x) (effective Nov. 5, 2012); 17
C.F.R. § 230.501(a)(6) (effective Mar. 28, 2012).
Waraich claimed to have submitted his Texas driver's
license, bank statements, and documents showing his previous
trading earnings. International Capital Markets approved
Capital Markets had a bank account with the National
Australia Bank, called a “Client Trust Account.”
(Docket Entry No. 1-5 at 2-5). When a client like Waraich
wanted to do a transaction on the foreign-exchange market,
the client would wire money to the Client Trust Account.
(Id.). International Capital Markets would then
credit the client with the money for the transactions.
(Id. at 7-13). Between August 2013 and February
2016, Waraich alleges that he transferred approximately $120,
000 to the Client Trust Account, which International Capital
Markets credited to him but that he lost in trading. (Docket
Entry No. 1 at 2).
2016, Waraich learned that International Capital Markets was
not registered as a swap dealer in the United States.
(Id. at 3-4). Waraich invoked the Commission's
procedures to seek “a reparation award” for a
Commodities Exchange Act violation under 17 C.F.R. §
12.13(a). Waraich filed a complaint with the Commission
against the National Australia Bank,  alleging that International
Capital Markets illegally failed to register with the
Commission but allowed him, a U.S. resident, to make swap
transactions that caused him to lose $120, 000.
parties may choose a voluntary, summary, or formal reparation
proceeding. 17 C.F.R. § 12.26. Waraich and the National
Australia Bank agreed to a voluntary,
‘no-frills' adjudication by a [Commission] Judgment
Officer based on the parties' documentary and tangible
submissions of proof. Both parties must elect this proceeding
for it to apply. 17 C.F.R. § 12.26(a). In agreeing to a
voluntary decisional proceeding, the parties waive their
rights to an oral evidentiary hearing, to a written statement
of findings of fact and conclusions of law, to the recovery
of attorney's fees and costs, and to appeal the final
decision to the Commission. Id. §§
Carr Invs., Inc. v. Commodity Futures Trading
Comm'n, 87 F.3d 9, 11 (1st Cir. 1996). The parties
may not “appeal the final decision to a U.S. Court of
Appeals.” 17 C.F.R. § 12.100(b). The final
unappealed decision is the “final order of the
Commission for all other purposes including the judicial
enforcement of an award made in connection with the final
decision.” Id. § 12.106(d).
April 2018, the Commission Judgment Officer issued a final
order after “carefully reviewing the legal and
evidentiary record.” Waraich v. Nat'l Austl.
Bank, Ltd., CFTC No. 17-R011, 2018 WL 2387844, at *1
(Apr. 20, 2018). The Officer determined that Waraich's
complaint “failed to establish, by a preponderance of
the evidence, any violations of the Commodity Exchange Act or
Commission regulations by [the National Australia Bank]
proximately causing damages.” Id. After the
Judgment Officer dismissed Waraich's complaint, he moved
for reconsideration, which the Judgment Officer considered
and denied. Waraich v. Nat'l Austl. Bank, Ltd.,
CFTC No. 17-R011, 2018 WL 4563082, at *2-*3 (Sept. 17, 2018).
October 2018, Waraich sued International Capital Markets and
the National Australia Bank in the Southern District of
Texas, raising the same allegations against both
International Capital Markets and the National Australia Bank
as he had before the Commission. Representing himself,
Waraich alleged that International Capital Markets
represented that it was a “qualified forex
dealer” in compliance with U.S. law, which he had
discovered was false in May 2017. (Docket Entry No. 1 at
1-4). He alleged that because International Capital Markets
was not registered with the Commission, it could not solicit
his investment or broker swap transactions for United States
residents. (Id. at 3). Waraich alleged that
International Capital Markets violated the Commodities
Exchange Act, including 7 U.S.C. § 25(a). (Id. at
2). He alleged that the National Australia Bank violated the
Commodities Exchange Act by accepting wire transfers for
International Capital Markets, and he appears to assert these
claims under 7 U.S.C. § 25(b). (Id. at 3).
Waraich seeks $120, 000 in actual damages for the money he
transferred to the Client Trust Account, which he lost in
transactions on the foreign-exchange market. (Id. at
2-3). He also seeks punitive damages. (Id.).
National Australia Bank moved to dismiss for lack of personal
jurisdiction. (Docket Entry No. 14). The court granted that
motion, finding that neither the complaint nor Waraich's
submissions provided a basis for general or specific
jurisdiction over the National Australia Bank. (Docket Entry
then moved for entry of default against International Capital
Markets and seemingly argued that the court should set aside
the decision dismissing the National Australia Bank. (Docket
Entry No. 23). The court denied the motion for entry of
default because Waraich did not show that International
Capital Markets had been properly served under Federal Rule
of Civil Procedure 4(f), and denied the motion to set aside
the dismissal of the National Australia Bank because
“Waraich's motion reiterates arguments that the
court has already considered and found unpersuasive.”
(Docket Entry No. 24 at 2, 5-8).
has now filed a series of motions asking the court to enter
default judgment; to grant leave to amend the complaint to
assert punitive damages (though his complaint already sought
them) and to name the Commission as a defendant; and to set
aside the National Australia Bank's dismissal. (Docket
Entry Nos. 26-29, 31). The National Australia Bank responded
to Waraich's motion to set aside the dismissal, arguing
that, “as with [Waraich's] previous motion for
reconsideration, [he] merely ‘reiterates that the court
has already considered and found unpersuasive.'”
(Docket Entry No. 31 (quoting Docket Entry No. 24 at 12)).
motion is considered below.