U.S. Commodity Futures Trading Commission v. Safety Capital Management, Inc. et al

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Case 1:15-cv-05551-NGG-PK
Document 84 Filed 03/10/26 Page 1 of 7 PageID #:

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK U.S. COMMODITY FUTURES TRADING COMMISSION,
MEMORANDUM & ORDER 15-CV-5551 (NGG) (PK)
Plaintiff,
-against-
SAFETY CAPITAL MANAGEMENT, INC. (d/b/a "FOREXNPOWER"), GNS CAPITAL, INC. (d/b/a "FOREXNPOWER"),
Defendants.
NICHOLAS G. GARAUFIS, United States District Judge.
In September 2015, the United States Commodity Futures Trad- ing Commission (the "Commission") commenced this civil action against Defendants Safety Capital Management Inc. ("Safety Capital"), GNS Capital Inc. ("GNS"), Sungmi Kang, Tae Hung Kang ("Kang"), and John H. Won ("Won").1 (Compl. (Dkt. 1) \ 1.) The Commission alleges violations of the Commodity Ex- change Act (the "Act"), 7 U.S.C. §§ 1 et seq. (2001), and Commission Regulations (the "Regulations") promulgated there- under, 17 C.F.R. §§ 1.1 et seq. (2001). (See Compl. [11, 62-110.) In October 2015, Safety Capital and GNS (collectively, the "De- faulting Defendants") were properly served with the Summons and Complaint in accordance with Rule 4 of the Federal Rules of Civil Procedure. (Safety Capital Executed Summons (Dkt. 5); GNS Executed Summons (Dkt. 6).) The Defaulting Defendants
1 At this stage in the case, only the charges against the Defaulting Defend- ants remain. On August 31, 2022, a Consent Order and Final Judgment was entered against Kang. (Kang Final J. (Dkt. 62).) On September 19, 2024, summary judgment was entered against Won. (Order Adopting Won R&R (Dkt. 66).) On August 25, 2025, the court dismissed all claims against Sungmi Kang pursuant to Rule 41(a)(2) of the Federal Rules of Civil Pro- cedure because she had passed away. (Order Dismissing Parties (Dkt. 75).)
1
AUTHENTICATED U.S. GOVERNMENT INFORMATION GPO

never answered or otherwise responded to the Complaint. Ac-
cordingly, the Clerk entered their Defaults in November 2015.
(GNS Default (Dkt. 9); Safety Capital Default (Dkt. 10).)
Three years later in 2018, the Government filed a parallel crimi-
nal action against Kang and Won (the "Criminal Action"). See
Indictment, United States v. Kang, No. 18-CR-0184 (RJD) (PK)
(E.D.N.Y. Apr. 11, 2018) (Dkt. 1). Kang pleaded guilty to securi-
ties fraud conspiracy and was ordered to pay $835,058.32 in
restitution. Min. Entry Dated 3/30/2021, Kang, No. 18-CR-0184
(E.D.N.Y. Mar. 30, 2021) (Dkt. 117); Kang Am. Crim. J. at 5,
Kang, No. 18-CR-0184 (RJD) 	(PK) 	(E.D.N.Y. Dec. 28, 2021)
(Dkt. 178).) Won was found guilty on all counts and was ordered
to pay. $842,076.81 in restitution. 2 Won Verdict Sheet, Kang,
No. 18-CR-0184 (RJD) (PK) (E.D.N.Y. Nov. 9, 2021) (Dkt. 167);
Won Am. Crim. J. at ECF p.15, Kang, No. 18-CR-0184 (RJD) (PK)
(E.D.N.Y. May 30, 2024) (Dkt. 206).
Fast forward to July 2025. The Defaulting Defendants had still
failed to appear in this case. Consequently, Magistrate Judge
Peggy Kuo directed the Commission to file a default judgment
motion against the Defaulting Defendants. (Text Order Dated
7/10/2025.) The Commission obliged. It now seeks an order
awarding permanent statutory injunctive relief, restitution in the
amount of $835,058.00, and imposing civil monetary penalties.
(Mem. of L. in Supp. of Mot. for Default J. ("Mot.") (Dkt. 74-1)
at 4-5.) The Defaulting Defendants did not respond to the Com-
mission's default judgment motion.
In November 2025, Magistrate Judge Peggy Kuo held a hearing
on 	the 	Commission's 	motion. 	(Tr. 	of Proceedings 	Held 	on
2 In this civil action, the court has already imposed a $835,058.00 joint and
several restitution order against Kang and Won. (Order Adopting Won
R&R at 3; Kang Final Civil J. (Dkt. 62) at 10.) Therefore, the court now
only considers a restitution amount of $835,058.00 against the Defaulting
Defendants.
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11/25/2025 ("Nov. 25 Hr'g Tr.") (Dkt. 77).) The Defaulting De-
fendants 	did not appear. 3 In response 	to 	that hearing, 	the
Commission supplemented its motion with further briefing and
a spreadsheet analyzing the Defaulting Defendants' bank ac-
counts and transactions with past customers. (See Supp. Mem. in
Supp. of Mot. (Dkt. 79); Attachment to Supp. Mem. (Dkt. 79-2).)
Last month, Magistrate Judge Kuo issued the annexed Report
and Recommendation (the "R&R") recommending that the court
grant the Commission's motion in full. (R&R (Dkt. 82) at 15.) No
party has objected to the R&R and the time to do so has passed.
See 28 U.S.C. § 636(b)(l); Fed. R. of Civ. P. 72(b)(2). Therefore,
the court reviews it "only for clear error." See Nambiar v. Cent.
Orthopedic Grp., UP, 158 F.4th 349, 359 (2d Cir. 2025). Seeing
none, the court adopts the R&R in its entirety.
As a threshold matter, Magistrate Judge Kuo correctly de-
termined that the Commission met the necessary procedural
requirements to move for default judgment. (See R&R at 7-8.)
She listed those various requirements under E.D.N.Y Rules 7.1
and 55.2 and cited the Commission's submissions that satisfied
them. (See id. (citing Dkt. 74, 74-1, 74-2, 74-3, 79, and 79-2).)
Thus, the court "identif[ies] no error in th[is] finding[], let alone
clear error." U.S. v. Vilar, 729 F.3d 62, 84 (2d Cir. 2013) (citing
U.S. v. Moreno, 701 F.3d 64, 76 (2d Cir. 2012)); see Asllani v.
Hoti, No. 19-CV-1106 (PGG) (RWL), 2020 WL 5439761, at *3
(S.D.N.Y. Sept. 10, 2020) (stating the same in reviewing a report
and recommendation for clear error).
3 Won did attend and disputed the Commission's analysis of the proposed
civil penalties against each of the Defaulting Defendants. (Nov. 25 Hr'g Tr.
at 2:22-3:07.) He was GNS's CEO from October 2013 through February
2014 and a former Vice-President of Safety Capital. (Compl. «J 20; Answer
(Dkt. 33) «J 20.) However, because Won is not an attorney, he may not
"represent" nor "appear'' on behalf of GNS. (See Nov. 25 Hr'g Tr. at 3 :04-06
(explaining the-same); see R&R at 7 n.2.)
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With respect to the merits, Magistrate Judge Kuo recommended
granting default judgment against Safety Capital on Counts 1
through 5, and against GNS on Counts 1 through 6. (R&R at 15.)
In light of the Defaulting Defendants' defaults, she correctly ac-
cepted the Commission's "factual allegations as true and dr[ew]
all reasonable inferences in [its] favor .... " See Finkel v. Ro-
manowicz, 577 F.3d 79, 84 (2d Cir. 2009) (stating the default
judgment standard). Magistrate Judge Kuo identified and ex-
plained specific factual allegations that the Commission had
alleged in its Complaint. (See R&R at 8-9 (Count 1), 9 (Count 2),
10 (Count 3), 10-11 (Count 4), 11-12 (Count 5), 12 (Count 6).)
She also explained how those allegations satisfied each element
of each Count. (See id.) Thus, having considered the well-pleaded
allegations in the Complaint and the essential elements of Counts
1 through 6, the court is not left with "the definite and firm con-
viction that a mistake has been committed." United States v.
Veeraswamy, 765 F. Supp. 3d 168, 180 (E.D.N.Y. 2025) (quoting
United States v. Snow, 462 F.3d 55, 72 (2d Cir. 2006)).
So too for Magistrate Judge Kuo's remedies analysis. Starting
with her recommendation that the court grant a permanent in-
junction, 	the 	Commission 	need 	only 	show 	"a 	reasonable
likelihood that the wrong will be repeated." (Mot. at 17 (citing 7
U.S.C. § 13a-1)); CFTC v. British Am. Commodity Options, 560
F.2d 135, 141 (2d Cir. 1977) (describing the ''well-established
rule" that "in actions for a statutory injunction, such as this, the
agency need not prove irreparable injury or the inadequacy of
other remedies as required in private injunctive suits"); see CFTC
v. McDonnell, 332 F. Supp. 3d 641, 725 (E.D.N.Y. 2018) (same).
A district court may infer the likelihood of future violations from
a defendant's past unlawful conduct. CFI'Cv. Kelly, 736 F. Supp.
2d 801, 804 (S.D.N.Y. 2010) (citing CFTC v. Am. Bd. of Trade,
Inc., 803 F.2d 1242, 1250-51 (2d Cir. 1986)).
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Here, the "Defaulting Defendants' actions were not isolated oc-
currences; rather, they engaged in a comprehensive scheme that
demonstrated a pattern of intentional fraudulent behavior."
(R&R at 13.) True, the Defaulting Defendants are "currently in-
active." (Mot. at 19.) But nothing currently prohibits them from
reactivating and resuming their retail forex business. See CFTC v.
Morgan, Harris & Scott, Ltd., 484 F. Supp. 669, 677 (S.D.N.Y.
1979) (''The purported cessation by defendants of their illegal
activity does not necessarily eliminate the likelihood of future vi-
olations."); CFI'Cv. Reynolds, No. 19-CV-05631 (MKV), 2021 WL
796683, at *6 (S.D.N.Y. Mar. 2, 2021) (concluding the same).
Thus, it was not clear error for Magistrate Judge Kuo to recom-
mend enjoining the Defaulting Defendants from engaging in
(1) future iterations of the violating conduct at issue, and (2) cer-
tain professional activities involving "commodity interests," as
defined in 17 C.F.R. § 3.l(a). See Veeraswamy, 765 F. Supp. 3d
at 180 (citing Snow, 462 F.3d at 72).
Next is Magistrate Judge Kuo's recommendation to grant restitu-
tion. (R&R at 13-14.) Under Section 6(c) of the Act, the court
may award "restitution to persons who have sustained losses
proximately caused by such violation (in the amount of such
losses)." 7 U.S.C. § 13a-l(d)(3)(A). Even though "a defaultjudg-
ment constitutes 	an 	admission 	of liability, 	the 	quantum of
damages remains to be established by proof." Flaks v. Koegel, 504
F.2d 702,707 (2d Cir. 1974); seeJoeHandProds., Inc. v. Benitez,
No. 18-CV-6476 (ARR) (PK), 2020 WL 5519200, at *3 (E.D.N.Y.
Aug. 27, 2020), R&R adopted, 2020 WL 5517240 (E.D.N.Y.
Sept. 14, 2020). The court "need not conduct an evidentiary
hearing," however, if the plaintiff submits admissible evidence
providing "a 'sufficient basis from which to evaluate the fairness
of the requested damages." Burns v. Scott, 635 F. Supp. 3d 258,
272 (S.D.N.Y. 2022) (quoting Fustok v. ContiCommodity Servs.,
Inc., 873 F.2d 38, 40 (2d Cir. 1989)).
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Here, the Commission's basis for the $835,058.00 restitution or- der comes from final criminal and civil judgments entered against Kang and Won ordering them to pay restitution of at least the same amount. (See Mot. at 6, 20-21 (discussing Kang Am. Crim. J. at ECF p.5; Kang Civil J. (Dkt. 62) at 10; Won Am. Crim. J. at ECF p.15; Order Adopting Won R&R (Dkt. 66) at 3); see also Nov. 25 Hr'g Tr. at 18:02-04, 18:24-19:05 (explaining how res- titution was calculated). Given that support-and the lack of compelling contravening evidence-a "review of the entire rec- ord" does not leave the court with a "definite and firm conviction that a mistake has been committed." See Veeraswamy, 765 F. Supp. 3d at 180 (citing Snow, 462 F.3d at 72).
The last remedy that the Commission requests is civil monetary penalties against each of the Defaulting Defendants. (Mot. at 4-5.) Given that the misconduct at issue occurred from at least October 2010 through December 2013, each penalty may be up to the greater of $140,000 per violation or triple the defendant's monetary gain. See 7 U.S.C. § 13a-1(d)(1) (setting baseline min- imum penalty); 17 C.F.R. § 143.8(b)(1)-(2) (adjusting that minimum for inflation based on when the misconduct occurred). In calculating the exact penalty within those guideposts, "[i]t is certainly reasonable to measure the gravity of the violations by the betrayal of public interest and by the need to deter threats to the integrity of the markets." Reddy v. CFTC, 191 F.3d 109, 128 (2d Cir. 1999). Magistrate Judge Kuo recognized that the "De- faulting Defendants not only engaged in a systematic and deliberate scheme to defraud the public, but they deliberately ex- ploited their access to a vulnerable community-Korean- language speakers in Queens who were totally reliant on [the Defaulting] Defendants to protect and manage their invest- ments." (R&R at 14.) Thus, she urged the court to grant the Commission's request for triple damages, which equals $1,441,143.00 against Safety Capital and $186,102.00 against GNS. (Id. at 14-15.) Per Reddy, that conclusion was "certainly
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s/Nicholas G. Garaufis
reasonable." See 191 F.3d at 128. Thus, it was not clear error. See
Veeraswamy, 765 F. Supp. 3d at 180 (citing Snow, 462 F.3d at
72).
For the foregoing reasons, the court ADOPTS the R&R in full.
Thus, it GRANTS the Commission's Motion for Default Judg-
ment. 	In 	accordance 	with 	the 	annexed 	Order 	of 	Default
Judgment, the court ORDERS the following remedies against the
Defaulting Defendants: (1) permanent injunctive relief; (2) res-
titution in the amount of $835,058.00, jointly and severally with
Kang and Won and with credit for any payments made in the
Criminal 	Action; 	and 	(3) 	a 	civil 	monetary 	penalty 	of
$1,441,143.00 against Safety Capital and $186,102.00 against
GNS.
SO ORDERED.
Dated: 	Brooklyn, New York
March Jb , 2026
7
ICHOIAS G. GARA 	S
United States District J dge
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