The Commodity Futures Trading Commission (CFTC) today charged several marketing firms and their operators, mostly based out of Israel, with binary options and cryptocurrency fraud to the tune of $15 million. They were working with a few brokers and marketed extravagant lifestyles, which they claim to have earned via online trading.
The case involves two massive solicitation schemes that had been running from October 2013 to August 2018, one involving binary options and the other digital assets, the CFTC said.
The binary options defendants were named as Tal Valariola and Itay Barak, both from Tel Aviv, and were charged with operating an Israel-based marketing company, Digital Platinum Limited (DPL). The agency says their business allegedly “aided and abetted” an offshore company called All in Publishing (AIP), which was accused of marketing fraudulent binary options to American and foreign investors on behalf of their associated brokers, who paid AIP and DPL commissions.
The regulator said the promotional content produced by these fraudsters was viewed millions of times and caused more than 60,000 people to open accounts to trade binaries, forex, metals, cryptos, among other assets, with their unregulated brokers.
The collective scheme involved fraudulent ad campaigns that relied on other marketers, known as “affiliates,” to promote trading systems and websites. They attracted their victims by sending misrepresentations about the trading platforms, also paying video producers to make fraudulent testimonials promoting the trading systems.
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While the CFTC describes the defendants’ ads as ‘pure fiction,’ the people in the videos told viewers that they were “enjoying rich lifestyles from trading binary options” and purported to show them that their trading balances increase automatically in live accounts.
The alleged marketing scheme also used “numerous false and misleading statements” about automated trading software developed by their companies, which “promised to generate massive and guaranteed profits with zero risk of loss.”
As a result of AIP’s fraudulent solicitations, from January 2014 to June 2016, the binary options brokers received about $13 million from 51,917 investors worldwide, including the United States. As for the crypto scammers, they allegedly had more than 8,043 customers who deposited more than $2 million between October 2016 and August 2018.
Customers who fell victim to the binary options and digital assets campaigns were required to deposit at least $250 initially.
The complaint also names a Florida resident, Daniel Fingerhut, who was charged with creating the fraudulent solicitations related to binary options on behalf of AIP. Fingerhut also managed Digital Platinum Defendants’ affiliate marketing program during this time. He was also part of the crypto scheme where investors were lured into the associated broker with the promise that they could use algorithmic trading software or a “bot” that would trade for them.
Interestingly, Fingerhut offered to cooperate with the CFTC investigations into the affiliate marketing fraud, also prepared a sworn declaration, and testified as a witness against his former colleagues. But rather than truthfully cooperate, he made false and misleading statements to the CFTC staff to conceal the extent of his role in the fraud and avoid submitting relevant documents and information.