CFTC Wins $451.6M Judgment in Global Binary Options Fraud Case

The Commodity Futures Trading Commission (CFTC) has won a significant win in a worldwide binary options fraud case, with a federal court ordering five offshore corporations and three persons to pay $451.6 million in restitution and penalties. The defendants were found guilty of fraud and other breaches of the Commodity Exchange Act (CEA) and CFTC rules by the United States District Court for the Northern District of Illinois, which imposed a default judgment against them. The fraudulent activity, which targeted citizens of the United States, was carried out using websites with false trade names including BigOption, BinaryBook, and BinaryOnline.

Among the defendants are:

• Yukom Communications Ltd.
• Linkopia Mauritius Ltd.
• Wirestech Limited (d/b/a BigOption)
• WSB Investments Ltd. (d/b/a BinaryBook)
• Zolarex Ltd. (d/b/a BinaryOnline)

Yossi Herzog, Lee Elbaz, and Shalom Peretz, all Israeli citizens, were also convicted guilty in connection with the conspiracy. The offenders were sentenced to pay 112.9 million in compensation to misled consumers, as well as a 338.7 million civil monetary penalty. The defendants are also permanently barred from registering with the CFTC or trading in CFTC-regulated markets.

The CFTC's lawsuit, filed on August 12, 2019, claimed that the defendants engaged in fraudulent actions from March 26, 2014, until the complaint was filed. The defendants defrauded clients by fraudulently representing that binary options trading was profitable via websites, emails, and phone conversations. In actuality, the vast majority of clients incurred losses. In order to acquire consumers' trust, the defendants falsified their names, financial competence, and locations.

The defendants were found to have stolen client cash and altered the risk parameters on their trading platform such that consumers seldom made successful transactions. They also utilized fraudulent techniques to deter consumers from withdrawing cash, such as omitting to disclose essential information concerning “bonuses” and “risk-free trades.” These actions enabled the defendants to benefit at the cost of innocent investors.

This action comes after a prior settlement with Yakov Cohen, another defendant in the scam. As part of a settlement judgment that resolved identical claims, Cohen was forced to disgorge $7 million in ill-gotten gains.

The CFTC's enforcement action demonstrates its commitment to combatting fraudulent binary options schemes and safeguarding US customers from financial abuse. According to CFTC Director of Enforcement James McDonald, “This case demonstrates the CFTC's commitment to holding fraudsters accountable, regardless of where they operate.” We will continue to collaborate with our foreign partners to combat corruption in global markets.

The decision serves as a stern message to people and businesses who engage in dishonest financial operations. The CFTC advises investors to proceed with caution when dealing with unregulated firms and to check the validity of trading platforms before investing.