Two web-based binary-options firms, Vault Options, Ltd. and Global Trader 365, have been slammed with a $3 million (£2.26 million) civil monetary penalty, plus $1,587,731 (£1,193,356.51) in restitution, and have been banned from future trading, for defrauding their customers and violating the Commodity Exchange Act.
Both of the companies are based in Israel, apparently are no longer doing business via the Internet, at least not using the names under which they have been sanctioned and banned.
The CFTC’s initial legal action in February describes Vault and Global Trader 365 (GT 365) as having “the same owner, who formed both Vault and GT 365.” The firms also shared the same bank account for accepting and commingling customer funds, and shared the same telephone number and staff names. The two firms operated “as a common enterprise,” according to the CFTC.
The penalties and the bans were ordered by the U.S. District Court for the Northern District of Illinois. The plaintiff in the case, filed in February of this year, was the CFTC, which has seemingly succeeded in putting out of business two unregulated “binary option” scams which defrauded at least 50 Americans, including the elderly and obviously vulnerable, who were defrauded out of at least $1.6 million, generally over the telephone.
The court found that the defendants “violated the Commodity Exchange Act’s ban on off-exchange options trading and off-exchange swaps trading by offering to enter into and entering into binary commodity option contracts with retail U.S. customers,” the CFTC says in a statement. “The (court’s) Order also finds that Defendants defrauded customers by making false representations in their solicitations and misappropriating their funds.”
Both the CFTC and the SEC have received “numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms,” according to a CFTC fraud advisory, which notes that there are at least three types of complaints: “refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades.”
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