United States District Court, W.D. North Carolina, Asheville Division
U.S. COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
OTC INVESTMENTS LLC, FOREX CURRENCY TRADE ADVISORS, LLC, and BARRY C. TAYLOR, Defendants.
Reidinger United States District Judge
MATTER is before the Court on Defendant Barry C.
Taylor's “Motion to Dismiss (with Prejudice) or in
the Alternative: Motion for Summary Judgment” [Doc. 59]
and Plaintiff U.S. Commodities Futures Trading
Commission's Motion for Summary Judgment against
Defendant Barry C. Taylor [Doc. 60].
FACTUAL AND PROCEDURAL BACKGROUND
civil case arises out of a foreign currency exchange pool
operated by the Defendant Barry C. Taylor
(“Taylor”) in this District between 2011 and
2015. On April 21, 2015, the Plaintiff U.S. Commodity Futures
Trading Commission (“CFTC”) filed a Complaint for
Permanent Injunction, Civil Monetary Penalties, and Other
Equitable Relief against Taylor and his companies, OTC
Investments LLC (“OTC”) and Forex Currency Trade
Advisors, LLC (“FCTA”). [Doc. 1]. The Complaint
alleges that the Defendants committed fraud in connection
with foreign currency exchange transactions, in violation of
Section 4b(a)(2)(A) and (C) of the Commodity Exchange Act
(“Act”), 7 U.S.C. § 6b(a)(2)(A), (C) and
Commission Regulation 5.2(b)(1)-(3), 17 C.F.R. §
5.2b(1)-(3) (“Count I”); that the Defendants
committed fraud while acting as commodity pool operators, in
violation of Section 4o(1) of the Act, 7 U.S.C.
§ 6o(1) (“Count II”); and that the
Defendants failed to register as commodity pool operators, in
violation of Section 4m(1), 7 U.S.C. § 6m(1)
(“Count III”). Contemporaneously with the filing
of the Complaint, the CFTC moved the Court for an Ex
Parte Restraining Order, which the Court granted after
oral argument on April 22, 2015. [Doc. 11]. On June 8, 2015,
the Court entered an Order of Preliminary Injunction and
Other Ancillary Relief against Defendant Taylor. [Doc. 31].
January 12, 2016, a criminal Bill Of Information was filed
against Taylor in this District, charging him with one count
of fraud while acting as a commodity pool operator, in
violation of § 4o of the Commodity Exchange
Act, 7 U.S.C. § 6o, and one count of
concealment money laundering, in violation of 18 U.S.C.
§ 1956(a)(1)(B)(1). [United States v. Taylor,
No. 1:16-cr-00002-MR-DLH-1, Doc. 1]. On that same date, a
Plea Agreement and a supporting Factual Basis were filed with
the Court. [Id., Docs. 3, 4]. On January 25, 2016,
Taylor appeared with counsel before Magistrate Judge Dennis
Howell and pleaded guilty to both counts in the Bill of
Factual Basis filed in support of the Plea Agreement
establishes that Taylor engaged in a fraudulent scheme in
violation of the Act to solicit more than $2.1 million from
18 pool participants located in North Carolina, other states
within the United States, and Canada, to participate in a
commodity pool that traded leveraged or margined retail
off-exchange foreign currency contracts, commonly known as
“forex.” As part of this illegal scheme, Taylor
misappropriated $529, 000 of pool participants' funds to
enrich himself and pay his personal expenses, including but
not limited to cash withdrawals or direct transfers of pool
participants' funds from the Bank accounts held by his
corporate entities, OTC and FCTA. Taylor treated pool
participants' funds as if they were his own personal
funds, spending pool participants' money on personal and
living expenses. Additionally, Taylor acted as an
unregistered commodity pool operator (“CPO”) by
operating and soliciting funds, securities, or property for a
pooled investment vehicle that is not an eligible contract
participant (“ECP”), as defined by the Act, and
that engages in retail forex transactions. At the plea
hearing, Taylor signed a certification that the information
set forth in the Factual Basis is true and accurate.
[Id., Doc. 12].
5, 2016, this Court sentenced Taylor to a term of 135
months' imprisonment and ordered him to pay restitution
to the victims of his criminal offenses in the amount of $2,
195, 244.01. [Id., Doc. 28]. Taylor is
currently incarcerated at the Federal Correctional
Institution Ashland in Ashland, Kentucky.
these civil and criminal proceedings were ongoing, Taylor
filed a voluntary Chapter 7 petition in the United States
Bankruptcy Court for the Western District of North Carolina,
No. 15-20037. [Bankruptcy No. 15-20037, Doc. 1]. On February
29, 2016, that court ordered a bankruptcy discharge as to
Taylor. [Id., Doc. 30]. On April 10, 2017, Taylor
filed a “Suggestion of Discharge” in this case,
wherein he contends that his bankruptcy discharges “any
and all debts allegedly owed to the Plaintiff herein.”
[Doc. 56 at 1].
CFTC now moves for summary judgment with respect to all of
the claims asserted against Taylor, as well as for the entry
of an order of permanent injunction and the imposition of
civil monetary penalties. [Doc. 60]. Taylor, who is
proceeding pro se in this matter, seeks a dismissal
of the claims against him, or in the alternative, the entry
of summary judgment in his favor. [Doc. 59].
parties have responded to the other's motion [Docs. 64,
65, 66]. Having been fully briefed, these matters are ripe
STANDARD OF REVIEW
judgment is proper “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.” Fed.R.Civ.P.
56(a). Thus, summary judgment must be entered “[w]here
the record taken as a whole could not lead a rational trier
of fact to find for the nonmoving party….”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). Once the moving party establishes
that there are no genuine issues of material fact, the burden
shifts to the non-moving party who “must do more than
simply show that there is some metaphysical doubt as to
material facts.” Id. at 586.
Federal Rule of Civil Procedure 56(c)(1), the nonmoving party
may not rely merely upon allegations or denials in its own
pleadings but must set forth specific facts showing that
there is a genuine issue for trial. To create a genuine issue
of material fact, the non-moving party must cite competent,
admissible evidence, and there must be sufficient evidence
for the jury to return a verdict for the non-moving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
251-52 (1986). “Where a party ‘fails to properly
support an assertion of fact or fails to properly address
another party's assertion of fact' in responding to a
summary judgment motion, the court is permitted to
‘consider the fact undisputed for purposes of the
motion, ' and to ‘grant summary judgment if the
motion and supporting materials -- including the facts
considered undisputed -- show that the movant is entitled to
it.'” S.E.C. v. Farkas, 557 F. App'x
204, 207 (4th Cir. 2014) (quoting Fed.R.Civ.P. 56(e)(2)-(3));
see Celotex Corp. v. Catrett, 477 U.S. 317, 322
Taylor is proceeding pro se, he was advised on or
about June 20, 2017, pursuant to Roseboro v.
Garrison, 528 F.2d 309 (4th Cir. 1975), that a failure
to adequately respond to the CFTC's motion for summary
judgment could result in the Court granting the CFTC's
motion and entering a judgment against him. [Doc. 62 at 4].
In his response to the CFTC's motion for summary
judgment, Taylor does not offer any forecast of evidence or
make any effort to dispute the forecast of evidence presented
by the CFTC. Because Taylor failed to refute the
Plaintiff's forecast of evidence, it is deemed undisputed
for the purpose of the present motions. See
Taylor's Motion to Dismiss/Motion for Summary
asserts two primary arguments in his motion to dismiss/motion
for summary judgment. First, Taylor contends that any
indebtedness he owes to the CFTC was discharged in
bankruptcy, and that, in any event, only the bankruptcy court
is the proper forum to litigate any dischargeability issues.
Second, Taylor contends that because he has already been
ordered to pay restitution in the criminal action, “any
additional judgment in the same amount, or for the same
indebtedness . . . violates the rule or doctrine which
prohibits a double recovery.” [Doc. 59 at 2].
Nondischargeability of Civil Monetary Penalties
the Bankruptcy Code, a debt is non-dischargeable “to
the extent such debt is for a fine, penalty, or forfeiture
payable to and for the benefit of a governmental unit and is
not compensation for actual pecuniary loss, other than a tax
penalty.” 11 U.S.C. § 523(A)(7); see also U.S.
Dep't of Housing & Urban Dev. v. Cost Control Mktg.
& Sales Mgmt. of Va., Inc., 64 F.3d 920, 927 (4th
Cir. 1995) (noting that “discharge in bankruptcy is not
intended to be a haven for wrongdoers”). Here, any
civil monetary penalty imposed on Taylor by this Court would
not be compensation for a pecuniary loss, but would rather be
a penalty payable to and for the benefit of the CFTC.
Accordingly, any civil monetary penalty imposed by this Court
would not be dischargeable in bankruptcy.
argument that only the bankruptcy court could make a
determination of dischargeability is also without merit.
District courts and bankruptcy courts are both “vested
with concurrent jurisdiction over nondischargeability
proceedings arising under Bankruptcy Code §
523(a)(7).” Whitehouse v. LaRoche, 277 F.3d
568, 576 (1st Cir. 2002). “Consequently, at their
option, creditors seeking a nondischargeability determination
need not submit to the jurisdiction of the bankruptcy court,
but instead may invoke the jurisdiction of any appropriate
nonbankruptcy forum either before or after the bankruptcy
proceeding has been closed.” Id. Thus, this
Court has concurrent jurisdiction to make a
nondischargeability determination under § 523(a)(7)
regarding the civil monetary penalty sought by the CFTC. As
such, the CFTC was not required to file an objection or take
any other affirmative action in the bankruptcy court in order
to receive a determination of nondischargeability for its
requested civil monetary penalties.
Taylor seeks dismissal of the CFTC's action on the
grounds that restitution has already been ordered in his
criminal prosecution and that granting judgment in favor of
the CFTC in this civil action would constitute a
argument on this point is meritless. While the Court may
award restitution in a civil enforcement action brought under
the Act, see United States v. Universal Mgmt. Servs.,
Inc., 191 F.3d 750, 760 (6th Cir. 1999), the CFTC is not
seeking civil restitution here. Rather, it is seeking the
award of civil monetary penalties. In any event, however,
restitution and civil monetary penalties can be - and often
are - awarded in the same civil action under the Act.
See 7 U.S.C. §§ 13a-1(d)(1)(A), (d)(3)(A).
Restitution awards in this context are measured by the amount
invested by customers less any refunds given to them by
defendants, while civil monetary penalties are based on the
amount of monetary gain to defendants as a result of the
violative conduct. See CFTC v. PMC Strategy, LLC,
No. 3:11cv73, 2013 WL 1349177, at *8 (W.D. N.C. Apr. 3, 2013)
(Mullen, J.). As such, the law allows for the imposition of
both restitution and criminal monetary penalties for the same
of these reasons, the Court concludes that Taylor's
motion for dismissal of CFTC's action or, in the
alternative, for summary judgment must be denied.
CFTC's Motion for Summary Judgment
Court now turns to the CFTC's motion for summary
judgment. Specifically, the CFTC seeks summary judgment on
its claims of fraud (Counts I and II) and its claim for
failure to register as a commodity pool operator (Count III).
It also seeks the entry of a permanent injunction and the
award of civil monetary penalties against Taylor.