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COMMODITY FUTURES TRADING COMM. v. INT'L FOREIGN CURRENCY

COMMODITY FUTURES TRADING COMMISSION, Plaintiff,
v.
INTERNATIONAL FOREIGN CURRENCY, INC., a New York Corporation, dba International Foreign Currency Exchange, dba I.F.C. Trading, Inc., THOMAS QUALLS, an individual and MICHAEL KOURMOLIS, an individual, Defendants.



The opinion of the court was delivered by: THOMAS PLATT, JR., Senior District Judge

MEMORANDUM AND ORDER

Before this Court are motions brought by International Foreign Currency, Inc. ("IFC"), Thomas Qualls ("Qualls") and Michael Kourmolis ("Kourmalis"), (collectively "Defendants"), to dismiss pursuant to Fed.R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction, and 12(b)(6), for failure to state a claim, the action commenced by the Commodities Futures Trading Commission ("CFTC" or "Plaintiff"). For the following reasons, Defendants' motions are DENIED.

BACKGROUND

  A. Factual History

  The CFTC brought suit against Defendants pursuant to the Commodity Exchange Act ("CEA") as amended by the Commodity Futures Modernization Act ("CFMA"). Defendant Qualls is the President of IFC, and Kourmalis "has identified himself variously as a `Senior Account Executive' and as `Vice President of Accounts' for IFC." (Compl. at ¶¶ 9-10). The CFTC alleges that from November 27, 2001 until at least July 11, 2003, Defendants offered and sold foreign currency futures contracts over the phone to the retail public out of the IFC office in Garden City, New York. (Compl. at ¶ 11).

  In the course of his solicitations, Defendant Kourmolis allegedly explained to at least one customer, Mrs. Blakers, that she would have an individual bank account with IFC and that Chase Manhattan Bank would insure the account for up to twenty-five million dollars. (Compl. at ¶ 13). Mrs. Blakers subsequently wired approximately $10,000 to IFC and Kourmalis sent her a written "Confirmation of Funds Transfer," stating that IFC had opened a personal account in her name and would begin trading on her behalf. (Compl. at ¶¶ 13-14); (Pl. Exh. 12).*fn1

  According to the complaint and Plaintiff's accompanying exhibits, however, Mrs. Blakers' money was neither deposited into an individual bank account nor transferred to IG Index, a London company, which Defendants allege executed the foreign currency transactions for IFC. (Compl. at ¶ 18); (Qualls Aff. at 1-2). Instead, Mrs. Blakers' funds were deposited into one account, Qualls' personal account, and were apparently used to pay for his personal expenses. (Id).*fn2 Her funds were also not insured by Chase Manhattan Bank and when Mrs. Blakers later attempted to close out her account, IFC ceased communication with her, and to date, has not returned any of her funds. (Compl. at ¶¶ 13-18).

  CFTC filed suit on July 23, 2003, alleging violations of § 4(a), § 4(b)(a)(2)(i) § 4(b)(a)(2)(iii) of the CEA, in addition to § 1.1(b) of the Commission Regulations. (Compl. at ¶¶ 3-5). Defendants subsequently filed the instant motions and oral argument was heard on March 19, 2004.

  DISCUSSION A. Standard of Review

  i. Fed.R. Civ. P. 12(b)(1)

  When considering a motion to dismiss for lack of subject matter jurisdiction, a court may look at materials other than the pleadings to decide the jurisdictional question. Sharp v. Bivona, 304 F. Supp. 2d 357, 362 (E.D.N.Y. 2004) (citing Robinson v. Gov't of Malaysia, 269 F.3d 133, 141 n. 6 (2d Cir. 2001)). The Court must accept all facts alleged in the complaint as true but the Court may not make inferences in favor of the party asserting jurisdiction. Smith v. Barnhart, 293 F. Supp. 2d 252, 254 (E.D.N.Y. 2003). While the party invoking the jurisdiction of the Court has the burden of proof, "dismissal is inappropriate unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him or her to relief." Fortress Bible Church v. Feiner, No. 03-4235, 2004 U.S. Dist. LEXIS 9614, at *3 (S.D.N.Y. March 29, 2004) (citing Sec. Investor Prot. Corp. v. BDO Seidman, LLP, 222 F.3d 63, 68 (2d Cir. 2000)).

  ii. Fed.R. Civ. P. 12(b)(6)

  When considering a motion to dismiss for failure to state a claim, the Court "must `accept all of the plaintiff's factual allegations in the complaint as true and draw inferences from those allegations in the light most favorable to the plaintiff." Bivona, 304 F. Supp. 2d at 362 (quoting Desiderio v. Nat'l Ass'n of Sec. Dealers, Inc., 191 F.3d 198, 202 (2d Cir. 1999)). The motion should be granted if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him ...


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