U.S. regulators have charged five Canadians in connection with an alleged US$165 million binary options fraud.
The U.S. Commodity Futures Trading Commission (CFTC) has charged five Canadians — one trio of brothers, David Cartu, Jonathan Cartu, and Joshua Cartu, and another pair of brothers, Leeav Peretz and Nati Peretz — along with one American and four companies over a binary options trading scheme.
Back in May, the Ontario Securities Commission (OSC) also brought proceedings against the Cartu brothers, alleging that they engaged in unregistered trading and illegal distributions of binary options that took in $1.4 million from investors in Ontario.
Those allegations have not been proven. A hearing is scheduled for Dec. 3.
Now, the CFTC has filed a civil enforcement action in the U.S. District Court for the Western District of Texas, which alleged that the scheme took in more than US$165 million from U.S. investors for illegal, off-exchange binary option trades on currency pairs, oil, and other commodities.
The regulator’s complaint alleged that from May 1, 2013 through April 29, 2018, the Cartu brothers sold illegal binary options to retail investors using various brands, BeeOptions, Glenridge Capital, and Rumelia Capital.
It said that both sets of brothers operated call centres located in Israel that targeted U.S. investors, and misrepresented their financial expertise, compensation structure, and identity, among other things.
A Texas resident and his company were also charged in the scheme, as were three companies controlled by the Cartus.
The CFTC said that the defendants manipulated some trades to force customer losses and generate profits for themselves.
It also said that they operated a new-defunct payment processor based in Ireland, Greymountain Management Ltd., to facilitate the transfer of funds from U.S. investors.
In its action, the CFTC is seeking disgorgement of ill-gotten gains, civil penalties, restitution, and permanent registration and trading bans.
“The scope and breadth of the fraudulent activity alleged in this case is only matched by that of the international and domestic cooperation organized to prosecute it,” said James McDonald, director of enforcement at the CFTC.
Along with the OSC, the CFTC said it also received cooperation from other regulators in the U.S., the UK, Australia, Belize, Cyprus, Germany, Ireland, Israel, Malta, and Switzerland.
“The CFTC is committed to leveraging not only our resources, but also our extensive relationships with domestic and foreign partners, to root out misconduct in our derivatives markets,” McDonald said.