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Waraich v. National Australia Bank Ltd.

United States District Court, S.D. Texas, Houston Division

May 30, 2019

SEAN WARAICH, Plaintiff,
v.
NATIONAL AUSTRALIA BANK LTD., and INTERNATIONAL CAPITAL MARKETS PTY. LTD., Defendants.

          MEMORANDUM AND OPINION

          LEE H. ROSENTHAL CHIEF UNITED STATES DISTRICT JUDGE.

         Sean 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.

         Waraich 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.

         I. Background

         In 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 Waraich's application.

         International 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).

         In 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, [1] 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.

         The 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. §§ 12.100(b), 12.105-.106.

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).

         In 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).

         In 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).[2] (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.).

         The 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 No. 21).

         Waraich 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).

         Waraich 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)).

         Each motion is considered below.

         II. ...


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