CFTC and SEC Penalize Netrios and Red Acre $2.5 Million Over Illegal Retail Commodity Transactions

The U.S. Commodity Futures Trading Commission (CFTC) has issued an order filing and settling charges against two foreign firms, Netrios LP Ltd. and Red Acre Ltd., for facilitating illegal off-exchange leveraged and margined retail commodity transactions involving U.S. customers who did not qualify as eligible contract participants. Under the terms of the settlement order, Netrios is required to pay a civil monetary penalty of $1.75 million, while Red Acre has been ordered to pay $750,000, bringing the combined penalties to $2.5 million. Both companies must also cease and desist from continuing their unlawful conduct. According to the CFTC's findings, Netrios sold specialized services that provided core operational functions used to market and execute leveraged or margined retail commodity transactions. These services were delivered through offshore, off-exchange branded platforms that actively solicited U.S. retail customers without verifying whether they met eligible contract participant criteria. In the United States, such retail commodity transactions may only be executed lawfully on a registered exchange. The regulator found that Red Acre intentionally aided and abetted Netrios by providing customer support and related operational assistance. In parallel with the CFTC action, the U.S. Securities and Exchange Commission (SEC) announced the filing and settling of charges against Netrios and Red Acre arising from the same underlying activities. The CFTC acknowledged the assistance and cooperation of the SEC as well as international regulators, including the Central Bank of Ireland, the Financial Services Authority of Seychelles, and the Malta Financial Services Authority.