COMMODITY FUTURES TRADING COMMISSION v. WORLDWIDEMARKETS, LTD., 2:21-cv-20715

Background

WorldWideMarkets, Ltd. (WWM), a BVI retail forex dealer owned by TAB Networks, Inc. (TAB), operated trading servers and executed customer forex trades from Woodcliff Lake, New Jersey during the Relevant Period (May 2011–at least Sept. 2018).
WWM repeatedly told customers (Account Agreement, website, marketing, oral statements) that customer funds were held in segregated, regulator‑approved accounts; the CFTC alleges those representations were false.
The CFTC alleges WWM transferred substantial customer "restricted" funds (about $4.6 million) from foreign bank accounts to TAB’s U.S. account and that TAB used those funds for operating expenses and shareholder distributions.
Arthur Dembro served as CFO of WWM/TAB, prepared/edited financials and was point of contact for the 2015 audit; he also served as compliance officer for a related UK affiliate (WWMOT) and allegedly directed use of customer funds in winding down WWMOT.
Procedural posture: CFTC sued WWM, TAB, Plaut, and Dembro; Plaut/WWM/TAB initially defaulted but sought to vacate the defaults and joined Dembro’s Rule 12(b)(6) motion. Judge McNulty GRANTED in part and DENIED in part Dembro’s motion to dismiss.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Timeliness under 28 U.S.C. § 2462	Tolling via fraudulent concealment; injunctive/disgorgement/restitution not necessarily barred	Claims based on conduct before 12/27/2016 are time‑barred; Count II cannot reach conduct before Aug 15, 2011 (effective date of rule)	Court: Civil penalties dismissed as to conduct before 12/27/2016; Count II dismissed as to conduct before 8/15/2011. Fraudulent concealment not adequately pled. Injunctive relief, disgorgement, restitution not time‑barred at this stage.
Extraterritoriality / Domestic application of CEA	Transactions are domestic: orders sent to and executed on WWM’s NJ servers; irrevocable liability occurred in U.S.	CEA shouldn’t apply extraterritorially; alleged conduct predominantly foreign	Court: Applied Morrison/RJR two‑step test; plausibly alleged domestic transactions (irrevocable liability in U.S.), so CEA claims survive.
Principal fraud (misrepresentation and misappropriation)	WWM represented funds were segregated while transferring them to TAB; misappropriation and false statements were material and made with scienter	Alleged misstatements and theft insufficiently pleaded or lack scienter	Court: Denied dismissal as to principal fraud claims—misrepresentations and misappropriation pleaded with required particularity and scienter.
Aiding & abetting liability for Dembro	Dembro, as CFO, prepared accounting, audited materials, managed WWMOT wind‑down and supplied marketing language—thus knowingly assisted fraud	Insufficient particularity; no allegation of intent to further fraud re: misrepresentations; silence alone insufficient	Court: Sufficient to plead aiding/abetting for misappropriation (affirmative acts: audit, winding down, accounting). Not sufficient for aiding/abetting misrepresentations (failure to correct earlier marketing statements inadequate).

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard; reasonable inference requirement)
Gabelli v. SEC, 568 U.S. 442 (discovery rule inapplicable to government civil penalties; distinguished fraudulent concealment)
Kokesh v. SEC, 137 S. Ct. 1635 (disgorgement is a penalty within §2462)
SEC v. Gentile, 939 F.3d 549 (3d Cir.) (properly framed injunctive relief is not a §2462 penalty)
Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247 (presumption against extraterritoriality; transactional test)
RJR Nabisco, Inc. v. European Cmty., 579 U.S. 325 (two‑step extraterritoriality analysis)
Cetel v. Kirwan Fin. Grp., Inc., 460 F.3d 494 (3d Cir.) (elements for fraudulent concealment/tolling)
United States v. Georgiou, 777 F.3d 125 (3d Cir.) (irrevocable liability test for domestic transaction)