The U.S. Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against five companies and four people, alleging they engaged in a global binary options fraud that took in at least US$103 million from investors.
The CFTC said that scheme — which involved companies based in Israel, the U.K., Mauritius, the Marshall Islands and other offshore jurisdictions — targeted investors in the U.S. and elsewhere to trade binary options online through sites such as BigOption, BinaryBook and BinaryOnline.
The regulator alleged the trading was not legitimate, and that investors’ positions were manipulated to force losses and generate profits for the companies, which were secretly on the opposite side of these trades.
The CFTC also said that the respondents used high-pressure sales tactics, concealed the operation’s true nature by using foreign nominees to open offshore bank accounts and “ultimately misappropriated” clients’ money.
One of the defendants to the CFTC action was convicted of wire fraud and conspiracy to commit wire fraud by a U.S. federal jury on Aug. 7 based on the same basic underlying facts as the CFTC’s allegations. She has yet to be sentenced in the case.
The CFTC’s complaint, which was filed in U.S. district court for the Northern District of Illinois, seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution for victims, and permanent registration and trading bans.
“Our efforts to hold wrongdoers accountable do not stop at our shores,” said James McDonald, director of enforcement at the CFTC.
Over the past couple of years, regulators in Canada and Europe have banned trading in binary options with retail investors amid ongoing concerns about investor protection.