CFTC Sets Sights on Binary Options Fraud

The CFTC continues its hot streak, aggressively pursuing fraudsters and rewarding whistleblowers who come forward with valuable information.  One particular enforcement trend stands out: a number of high-profile settlements related to illegal binary options trading platforms.

Binary options are the OTB of the stock market—a method of gambling whether particular stocks will go up or down without actually purchasing the underlying stock.  Because of their inherent riskiness and liability for abuse, very few trading platforms are authorized for binary options.  Yet that doesn’t stop a series of fraudsters from aggressively marketing illegal binary options platforms to unsuspecting customers and bilking them out of millions of dollars.  The CFTC identified stopping this practice as an enforcement priority in 2019, and so far is making good on its promise with three large settlements in the past year.

First, in September 2019, the CFTC settled charges with Yucom Communications and associated individuals for operating a fraudulent binary options scheme worth $103 million.  The scheme solicited customers to engage in off-book transactions and to buy binary options from illegal brokers.

Next, the CFTC filed a complaint against Daniel Fingerhut and co-conspirators for a $20 million scheme to illegally induce customers to open and fund off-exchange binary options and digital asset trading accounts.  The scheme promised high returns with no risk, and aggressively marketed to customers with that false promise.

Most recently, in September 2020, the CFTC filed a complaint against an international group of individuals and interlocking shell corporations with setting up multiple illegal binary options trading platforms, creating a payment processor in Ireland to process illegal payments for the same, and illegally marketing the platforms through affiliate marketing schemes.  By offering unsuspecting customers returns of 60-85% (when in reality almost everyone lost money), the alleged fraudsters managed to obtain over $165 million.  One of the individuals charged, Josh Cartu, is well known as an Instagram influencer and Ferrari lover.

The similarities between the schemes suggests that this is a well-worn path for fraudsters.  The CFTC’s aggressive stance suggests a continuing interest in stopping this type of fraud to protect the public.  If you have information about binary options fraud, please contact us.

Read more:

• CFTC Enforcement Actions
• CFTC Whistleblower Program
• Calling all FCPA Whistleblowers — The CFTC Wants You!
• Our other posts on CFTC Whistleblowers
• Whistleblower FAQs

Tagged in: CFTC Whistleblower Reward Program, Fraud in CFTC-Regulated Markets, Market Manipulation and Trading Violations, Whistleblower Rewards,