The U.S. CFTC (Commodity Futures Trading Commission) has charged a California resident for operating a string of binary options affiliate websites, which allegedly cost Americans $16 million.
The websites, according to the CFTC, were directing users to binary options brokers through offshore businesses.
CFTC Complaint Charge
The complaint, which was unsealed on July 10, charges Jason B. Scharf and several of his companies, including: CIT Investments Ltd in Marshall Islands, CIT Investments LLC in Nevada, CIT Investments Ltd in Anguilla, Brevspand EOOD in Bulgaria and A & J Media Partners, Inc. in California. Michael Shah of Florida and his company Zilmil Inc. have also been charged in the scheme.
The CFTC claims that the defendants solicited and accepted funds for binary options trades that were unregistered. The defendants were not registered with the CFTC, nor did they make trades on a board of trade that is registered, as is required by law.
The CFTC also alleges that the defendants directed client funds into losing trades.
The complaint claims that Shah and Zilmil have, since 2014, been attracting potential traders through fraudulent ad campaigns, which directed customers to purchasing binary trading systems. Customers were then directed to binary options websites, like the ones owned by Scharf.
Scharf then solicited customers to open accounts by making false claims of “guaranteed returns” and exaggerated profits. These results were supported by fake testimonials. Once customers funded their accounts, they did not receive their money back, according to the complaint.
Structure of the Scheme
Funds were allegedly routed through foreign corporations and accounts overseas before being spent on personal and business expenses.
A statutory restraining order was issued last Wednesday by a U.S. District Judge, which freezes the assets of Scharf, Zilmil and Shah. A temporary receiver will seize the assets. They will retain the defendants records and books, which the CFTC will have access to.
“The scheme, as alleged, was massive, resulting in the misappropriation of over $!6 million from more than 8,000 customers,” said James McDonald, CFTC Director of Enforcement. “This action should send a message to would-be fraudsters that the sort of conduct alleged here will not be tolerated.”
The CFTC is seeking restitution to defrauded customers, civil monetary penalties and disgorgement of ill-gotten gains. They are also seeking permanent registration and trading bans.
The court has scheduled a hearing for July 26, 2017 to determine whether to continue the freeze on the defendants’ assets and whether to order a preliminary injunction against the defendants.