October 13, 2016

New York-based Forcerank LLC will pay a $50,000 penalty for illegally offering complex derivatives products to retail investors through mobile phone games described as “fantasy sports for stocks.”  According to the SEC’s order, Forcerank ran mobile phone games where players predicted the order in which 10 securities would perform relative to each other.  Players won points and some received cash prizes based on the accuracy of their predictions.  Forecerank kept 10% of the entry fees and maintained a data set about market expectations it hoped to sell to hedge funds.  Forerank’s agreements with players were security-based swaps because they provided for a payment that was dependent on an event associated with a potential financial, economic, or commercial consequence and based on the value of individual securities.  An SEC investigation found that Forcerank failed to file a registration for what constituted a security-based swap offering and failed to sell the contracts through a national securities exchange.  Both are requirements under the Dodd-Frank Act to ensure information about an offering is fully transparent to retail investors and the transactions are limited to platforms subject to the highest level of regulation.  SEC

Tagged in: Fraud in CFTC-Regulated Markets,