Commodity Futures Trading Comm'n v. Garcia

COMMODITY FUTURES TRADING COMMISSION, Plaintiff, v. MAYCO ALEXIS MALDONADO GARCIA, CESAR CASTANEDA, JOEL CASTANEDA GARCIA, and RODRIGO JOSE CASTRO MOLINA, jointly d/b/a GLOBAL TRADING CLUB, Defendants.

Civil Action No. 4:20-cv-03185

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

September 21, 2021

ORDER OF FINAL JUDGMENT BY DEFAULT, PERMANENT INJUNCTION, RESTITUTION, CIVIL MONETARY PENALTY, AND OTHER EQUITABLE RELIEF AGAINST DEFENDANT RODRIGO JOSE CASTRO MOLINA

SIM LAKE, UNITED STATES DISTRICT JUDGE.

I. INTRODUCTION

On September 11, 2020, Plaintiff Commodity Futures Trading Commission ("Commission" or "CFTC") filed a Complaint for Injunctive Relief, Restitution, Civil Monetary Penalties and Other Equitable Relief ("Complaint" or "CompI.") against Defendant Rodrigo Jose Castro Molina ("Castro") and others jointly doing business as Global Trading Club. (ECF No. 1) The Complaint sought injunctive and other equitable relief, as well as the imposition of civil penalties, for violations of the Commodity Exchange Act ("Act"), 7 U.S.C. §§ 1-26 (2018), and the Commission's Regulations ("Regulations") promulgated thereunder, 17 C.F.R. pts. 1-190.10 (2021).

The Complaint alleges that from at least August 2016 through October 2017 (the "Relevant Period") Castro, Mayco Alexis Maldonado Garcia ("Maldonado"), Cesar Castaneda, and Joel Castaneda Garcia (collectively "Defendants"), operating under the name "Global Trading Club" ("GTC"), fraudulently solicited at least 27 customers to deposit at least $989, 000 in order to speculate in price movements of Bitcoin, a digital asset. (Compl. ¶¶ 1-2) The Complaint further alleges that Defendants solicited customers using multiple methods, including a web site, YouTube videos, social media, and in-person marketing presentations. (Compl., ¶ 1721) Defendants misrepresented to actual and potential customers the purportedly extensive trading experience of traders employed by GTC, and the expected earnings and bonuses that GTC marketing documents guaranteed for all customers. (Compl. ¶¶ 1 and 22-26) To conceal their fraud, Defendants caused misleading trading statements to be posted online. These misleadiug trading statements did not accurately reflect the Bitcoin trading purportedly undertaken by Defendants. (Compl., ¶¶ 3 and 27) The Complaint alleges that Defendants' conduct violated Section 6(c) of the Commodity Exchange Act (the "CEA"), 7 U.S.C. § 9(1) (2018), and CFTC Regulation 180.l, 17 C.F.R. §180.l (2021). (Compl. ¶ 5)

II. PROCEDURAL IDSTORY

On September 11, 2020, the Commission filed its Complaint. (ECF No. 1) On December 31, 2020, the Commission served Castro with the Complaint. (ECF No. 30.) Castro failed to answer or otherwise respond to the Complaint; accordingly, Plaintiff applied for entry ofdefault pursuant to Federal Rule of Civil Procedure 55(a). (ECF No. 57) On August 12, 2021, the Court Clerk entered default as to Castro. (ECF No. 58) Thereafter, the Court directed Plaintiff to move for default judgment against Castro on or before September 7, 2021. (ECF No. 59, 61)

The Commission has now submitted its Motion for Entry of Default Judgment, Permanent Injunction, Restitution, Civil Monetary Penalty, and Other Equitable Relief Against Castro ("Motion") pursuant to Fed.R.Civ.P. 55(b)(2), as well as a supporting Memorandum of Law (''Memorandum") and attachments thereto. (ECF Nos. 62 and 63) The Court has considered carefully the Complaint, the allegations of which are well-pleaded and hereby taken as true, the Motion, and the Memorandum. Being fully advised in the premises, the Court hereby:

GRANTS the Commission's Motion and enters the following Findings of Fact and Conclusions of Law finding Castro liable as to all violations as alleged in the Complaint. Accordingly, the Court now issues the following Order which: (i) determines that Castro violated Section 6(c)(1), 7 U.S.C. § 9(1) (2018); and Regulation 180.1(a), 17 C.F.R.§ 180.1(a) (2020); (ii) imposes on Castro Street a permanent injunction; and (iii) orders Castro to pay restitution and a civil monetary penalty.

III. FINDINGS OFFACT

A. The Parties

1. Plaintiff Commodity Futures Trading Commission is an independent federal regulatory agency charged by Congress with responsibility for administering and enforcing the provisions of the Act, 7 U.S.C. §§ 1-26 (2018) and the Commission Regulations promulgated thereunder, 17 C.F.R. pts. 1-190 (2021).

2. Defendant Rodrigo Jose Castro Molina is an individual residing in Houston, Texas. He is also known by the names Rodrigo Castro, Jose Molina, and Jose Castro. He has never been registered with the CFTC.

B. Defendants Solicited Customers to Purchase Bitcoin with GTC

3. In 2016, Defendants began to market a new business called GTC. The stated purpose of GTC was to offer customers an opportunity to profit from speculative trading that was based upon price fluctuations in Bitcoin.

4. Although Defendants marketed Bitcoin trading using the GTC name, GTC did not exist as a separate legal entity.

5. During the Relevant Period, Defendants continued to promote the GTC business, using numerous channels, including a web site, www.gtcexchange.com ("GTC web site"); a smartphone app called "GTC Digital"; videos posted to a YouTube channel; and a Facebook page called Global Trading Club. The GTC web site and Facebook page presented Castro as a key leader in the company. On the GTC web site, Castro was listed a member of GTC's "Master Council Leadership"; on the GTC Facebook page and Castro's personal Facebook page, Castro was called a "Financial Advisor Bitcoin" and a "Master Council" for GTC.

6. Additionally, throughout the Relevant Period, Defendants made representations directly to actual and potential customers during GTC "cryptocurrency" seminars held by Defendants in Houston and elsewhere in the United States. During these seminars, Defendants shared a GTC marketing presentation, which contained the same representations found on the GTC web site and in the YouTube videos. .

7. The GTC seminars conducted by Castro included the following:

• In September 2016, Castro and Maldonado spoke with potential customers in Los Angeles, and Castro spoke with potential customers in Las Vegas. Castro advertised these seminars in Spanish-language posts on Facebook;

• "With our automated trading software and monitoring system, trades are done automatic [sic] for members with no risk. Finally the best way to trade with no experience. 'Put your bitcoin to workf or you'." (emphasis in original)

• In September 2016, Castro, Cesar Castaneda, Joel Castaneda Garcia, and Maldonado hosted a seminar at Drury Inn and Suites in Houston. Castro advertised the seminar in a Spanish-language post on Facebook.

• In November 2016, Castro spoke with potential customers in Miami. He advertised this seminar in a Spanish-language post on Facebook, as well as a Spanish-language multilevel marketing web site, www.universomlm.com, in which Castro is referenced as a "socio fundador" (translated as "founding member") and "Master Internacional" (translated as "International Master") of OTC. Castro also purported to achieve "un explosivo crecimiento en apenas dos meses" (translated as "explosive growth in two short months") for OTC; and

• In December 2016, Defendants hosted a OTC holiday party for potential customers at a hotel in Houston. Maldonado, Cesar Castaneda, Joel Castaneda Garcia, and Rodrigo Castro attended.

8. Defendants marketed the OTC business to non-English-speaking residents of the United States. The OTC web site highlighted Korean- and Spanish-speaking representatives of the business. Maldonado circulated Spanish and Korean translations of the OTC marketing presentation to Castro and the other Defendants, as well as other individuals who marketed the OTC business on behalf of Defendants. The YouTube videos were also translated into Spanish, Korean, and other languages.

C. Defendants Made False and Misleading Representations when Soliciting GTC Customers

9. The OTC web site, YouTube videos, marketing presentations, and/or other OTC marketing materials included the following representations:

• OTC employed "over 75 master traders";

• These traders had years of trading experience in "crypto currency" trading;

• OTC customer "capital is continuously being traded in a real time environment, by our expert traders and cutting edge trading robots 24 hours a day, 7 days a week."

10. The GTC marketing materials further represented that customers could join one of multiple GTC membership levels, ranging from $250 ("Entrepreneur" level) to $31, 000 ("Founder Trader" level). The GTC marketing materials set forth guaranteed specific daily earnings, which would increase based on the customer's membership level at GTC.

11. The GTC marketing materials offered further earnings through its multi-level marketing structure, under which customers could earn additional money by referring new customers to GTC. Customers were promised a cash borius for each direct referral, in the amount of20 percent of the deposit made by the referred customer. Customers were further offered bonuses for indirect referrals and a "binary matching bonus" for multi-level marketing "teams." The amount of the bonuses increased ifcustomers made additional deposits with GTC, which placed them at a higher membership level within GTC.

12. Castro made representations similar to those set forth in Paragraphs 9-11 above during the GTC seminars, and other customer meetings described in Paragraphs 6-8 above, and which Castro advertised on social media.

13. The representations set forth in Paragraphs 9-11 are false. Defendants employed no traders, and neither created nor used any trading robots. Accordingly, GTC customer capital was not ...