U.S. Commodity Futures Trading Comm'n v. Allied Markets LLC

• Decision Date: 04 March 2019
• Docket Number: Case No. 3:15-cv-5-J-34MCR
• Parties: U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff, v. ALLIED MARKETS LLC, Joshua Gilliland, and Chawalit Wongkhiao, Defendants.
• Court: U.S. District Court — Middle District of Florida

371 F.Supp.3d 1035

U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,

v.ALLIED MARKETS LLC, Joshua Gilliland, and Chawalit Wongkhiao, Defendants.

Case No. 3:15-cv-5-J-34MCR

United States District Court, M.D. Florida, Jacksonville Division.

Signed March 4, 2019

Jonah Eric McCarthy, US Commodity Futures Trading Commission, Washington, DC, for Plaintiff.

Allied Markets, LLC, Chattanooga, TN, pro se.

Joshua Gilliland, Chattanooga, TN, pro se.

Chawalit Wongkhiao, Folkston, GA, pro se.

ORDER

MARCIA MORALES HOWARD, United States District Judge

This action is brought by the United States Commodity Futures Trading Commission (CFTC), pursuant to its authority under section 6 of the Commodity Exchange Act (CEA), 7 U.S.C. § 13a-1 (2012), against Defendants Allied Markets LLC (Allied), Joshua Gilliland (Gilliland), and Chawalit Wongkhiao (Wongkhiao). CFTC alleges that the Defendants violated the CEA, 7 U.S.C. §§ 1, et seq. , along with several regulations codified in the Code of Federal Regulations (CFR), 17 C.F.R. §§ 1, et seq. (2012), in connection with the operation of an illegal commodity pool trading in foreign currency exchange options, otherwise known as "Forex."¹ See generally Complaint for Injunctive Relief, Civil Monetary Penalty, and Other Equitable Relief (Doc. 3; Complaint), filed on January 12, 2015. At the beginning of these proceedings, on CFTC's motion, the Court entered an ex parte statutory restraining order. See Order Granting Plaintiff's Ex Parte Motion for Statutory Restraining Order and Scheduling Preliminary Injunction Hearing (Doc. 9; Statutory Restraining Order). Thereafter, with the consent of all Defendants, the Court entered a preliminary injunction and asset freeze which remains in place today. See Order (Doc. 18), entered January 20, 2015.

The matter is currently before the Court on CFTC's Motion for Summary Judgment against Defendants Joshua Gilliland and Chawalit Wongkhiao (Doc. 53; Motion), filed on October 2, 2015.² Although given adequate time to do so, neither Defendant Gilliland nor Wongkhiao (hereinafter, Defendants) responded to the Motion. As such, on November 10, 2015, this Court entered an Order directing Defendants to file a response to the Motion by December 4, 2015, and advised Defendants that if they failed to respond, the Court would treat the Motion as being unopposed. See Order (Doc. 58), signed on November 9, 2015. As of this date, neither Defendant has filed a response to the Motion. Accordingly, the Motion is ripe for review.

I. Standard of Review

Under Rule 56, Federal Rules of Civil Procedure (Rule(s) ), "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 56(a). The record to be considered on a motion for summary judgment may include "depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials." Rule 56(c)(1)(A).³ An issue is genuine when the evidence is such that a reasonable jury could return a verdict in favor of the nonmovant. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (quoting Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 919 (11th Cir. 1993) ). "[A] mere scintilla of evidence in support of the non-moving party's position is insufficient to defeat a motion for summary judgment." Kesinger ex rel. Estate of Kesinger v. Herrington, 381 F.3d 1243, 1247 (11th Cir. 2004) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).

The party seeking summary judgment bears the initial burden of demonstrating to the Court, by reference to the record, that there are no genuine issues of material fact to be determined at trial. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). "When a moving party has discharged its burden, the non-moving party must then go beyond the pleadings, and by its own affidavits, or by depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593–94 (11th Cir. 1995) (internal citations and quotation marks omitted). Substantive law determines the materiality of facts, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. In determining whether summary judgment is appropriate, a court "must view all evidence and make all reasonable inferences in favor of the party opposing summary judgment." Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1995) (citing Dibrell Bros. Int'l, S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1578 (11th Cir. 1994) ).

II. Background⁴

Defendants were the managing and sole members of Allied, a limited liability company that Defendants operated from at least February of 2012 until December of 2014. See Deposition of Allied Markets, LLC, through Joshua Gilliland, and Joshua Gilliland, Individually, Taken on behalf of the Plaintiff (Doc. 53-1; Deposition), dated January 16, 2015, at 29–30; Factual Basis of Wongkhiao Plea Agreement (Doc. 53-6; Wongkhiao Plea), dated August 21, 2015, at 17; Factual Basis of Gilliland Plea Agreement (Doc. 53-7; Gilliland Plea), dated September 10, 2015, at 16; see also Complaint ¶ 9; Answer of Defendant Joshua Gilliland (Doc. 19; Gilliland Answer), dated January 22, 2015, ¶ 9; Answer of Defendant Chawalit Wongkhiao (Doc. 20; Wongkhiao Answer), dated January 23, 2015, ¶ 9.⁵ Defendants formed Allied for the purpose of trading Forex, and operated the company mainly out of Jacksonville, Florida. See Deposition at 16, 34–36; Wongkhiao Plea at 17; Gilliland Plea at 16. Allied would solicit money from potential customers, who would provide such funds to the company for the purpose of trading in Forex.⁶ See Deposition at 17. During the period of its operation, funds invested by customers constituted Allied's sole source of revenue. See id. at 19–20, 24.⁷ Indeed, Allied never made a profit trading Forex. See Deposition at 81-82; Gilliland RFAs at 28; Wongkhiao RFAs at 29; Allied RFAs at 54; Wongkhiao Plea at 24; Gilliland Plea at 23. Allied marketed Forex investments to clients by guaranteeing them a certain rate of return, or interest, regardless of whether the trading resulted in a profit or loss to Allied. See id. at 25–27, 85– 87, 96–97; see also Gilliland RFAs at 11, 16; Wongkhiao RFAs at 12, 17; Allied RFAs at 44, 48. Critically, Allied was never registered with CFTC or any federal or state agency as a foreign exchange dealer or commodity pool operator, and neither Gilliland nor Wongkhiao ever registered with CFTC, or any federal or state agency, as associated persons of such an entity. See Deposition at 40; Gilliland RFAs at 5, 7; Wongkhiao RFAs at 5, 7; Allied RFAs at 39, 41; Gilliland Answer ¶¶ 9–11, 74; Wongkhiao Answer ¶¶ 9–11, 74.

Gilliland and Wongkhiao acted as managing members of Allied and "jointly controlled" the business, with Gilliland serving as its registered agent. See Gilliland Plea at 16; Wongkhiao Plea at 17; see also Deposition at 30, 38–39; Gilliland RFAs at 6–7; Wongkhio RFAs at 6–7; Allied RFAs at 40. Wongkhiao solicited customers to invest their money with Allied and conducted the majority of the Forex trades. See Deposition at 37– 38, 70-71, 83, 91; see generally Wongkhiao Plea (Wongkhiao conducted various trades with investors). Wongkhiao also executed checks and agreements with investors on behalf of Allied. See Deposition at 84, 96; Wongkhiao RFAs at 11–13, 17, 21; Allied RFAs at 44, 45, 47, 49, 50. Gilliland's role in the company was to manage the information technology required to facilitate trading—he set up the servers and computers and created Excel spreadsheets and Microsoft Office documents for use during trading. See id. at 32-33. On occasion, though not very often, Gilliland himself conducted trades. See id. at 32, 70–72; see also Gilliland RFAs at 28. In his deposition, Gilliland stated that he never solicited customers to invest in Allied. See Deposition at 132-34; see also id. at 83, 91. However, CFTC served Gilliland with the Gilliland RFAs, to which Gilliland failed to respond, despite having been served with them on two occasions. See generally Gilliland RFAs; Allied RFAs. In the Gilliland RFAs, CFTC requested that Gilliland admit that he solicited customers to provide funds to Allied. See Gilliland RFAs at 10, 15, 18, 22, 30. Pursuant to Rule 36, "[a] matter is admitted unless, within 30 days after being served, the party to whom the request is directed serves on the requesting party a written answer or objection addressed to the matter and signed by the party or its attorney." Rule 36(a)(3). Gilliland did not respond to or otherwise deny the requested admissions, therefore, the facts in the relevant request are deemed admitted. See Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264 (11th Cir. 2003) (citing United States v. 2204 Barbara Lane, 960 F.2d 126, 129-30 (11th Cir. 1992) ). Where, as here, Gilliland's deposition and his admissions conflict, Gilliland's admissions control. See James Wm. Moore, 7 Moore's Federal Practice § 36.03, at 36-15; see also Sook Kim v. Goldstein, No. 04 Civ. 3755(KMW), 2007 WL 1649902, at *2 (S.D.N.Y. June 6, 2007) (noting that "[t]o the extent that Plaintiffs' admissions conflict with deposition testimony, the former are controlling.").

Wongkhiao and Gilliland set up several bank accounts with Citibank⁸ in Allied's name—two checking accounts and one money market account. See Deposition at 41. Only Wongkhiao and Gilliland were authorized to access the Allied accounts. See id. at 49–50. The purpose of the Citibank accounts was to facilitate and hold funds for Forex trading, see id. at 43, and...