Ping He (Hai Nam) Co. Ltd. v. NonFerrous Metals (U.S.A.) Inc.
United States District Court for the Southern District of New York
22 F. Supp. 2d 94 (1998)
- Written by Brett Stavin, JD
Facts
Ping He (Hai Nam) Company Limited (Ping He) (plaintiff) held a futures trading account with NonFerrous Metals (U.S.A.) Inc. (NFM) (defendant), both entities owned by the Chinese government. Though NFM held itself out as a broker of commodity futures, it was not registered by the Commodity Futures Trading Commission (CFTC) to do so. Ping He’s account with NFM was nondiscretionary, meaning NFM could not make trades on the account unless specifically instructed to by Ping He or its designated agent. Ping He designated China National Metal Products (China Metals) as its agent on the account. Eventually, China Metals requested that NFM suspend trading activity on the account, and it additionally requested a list of all trades executed on the account and a list of any commissions charged. NFM sent an invoice charging Ping He $344,893, consisting of $104,500 in alleged trading losses and $240,393 in commissions and interest. Ping He partially paid the invoice and then brought a suit in federal district court for fraud. Ping He claimed that NFM misrepresented itself as a registered commodity broker and that NFM was never authorized to make trades on its behalf. Specifically, Ping He claimed that the alleged trades were either unauthorized, fictitious, or made on other customers’ accounts and then fraudulently allocated to Ping He’s account. Ping He further pointed to the fact that NFM was unable to produce records reflecting the trades allegedly made on the account. In response, NFM claimed that the trades were authorized by a company named NonFerrous B.M. Corporation, which was allegedly appointed as China Metals’ agent. NFM also claimed Ping He knew from the start that NFM was not registered with the CFTC.
Rule of Law
Issue
Holding and Reasoning (Sotomayor, J.)
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