The US Securities and Exchange Commission (SEC) has ordered EZTD Inc. to pay more than $1.7 million for misleading investors into trading binary options online before January 2014. The charges were revealed by the company some months ago, with an SEC filing adding specifics to the news . EZTD Inc. manages three binary options brands, EZTrader.com, EZinvest.com, and EZInvest-sec.jp.
A number of countries have been cracking down on binary options trading, though the instrument continues to be marketed worldwide via unregulated brands. The SEC’s fine was levied against EZTD Inc. for failing to register as a broker-dealer to legally sell the offer the instrument to US investors. Moreover, EZTD Inc. also did not properly disclose the loss risks.
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For its part, the SEC finds that EZTD made statements that falsely inflated the profitability of trading binary options, referring to it as a “highly profitable trading platform” and “an extremely lucrative avenue for individuals who are looking to see an increase in income”. Despite the fine, the SEC has also warned that many other firms operating presently are likely guilty of the same falsehoods.
Regarding EZTD Inc., the SEC found that less than 3% of the approximately 4,000 US investors who opened accounts with the group were actually able to book any profits from their investment. Subsequently, EZTD has to forfeit approximately $1.5 million in revenues obtained from US customers as well as pay a $200,000 penalty. EZTD no longer sells binary options in the US.
According to Stephanie Avakian, Deputy Director of the SEC’s Division of Enforcement, in a recent statement on the order: “EZTD’s revenues were largely derived from customer trading losses, yet EZTD emphasized the profitability of trading in binary options. Companies dealing in binary options must disclose more than general statements about investment risk so investors in these instruments understand that the odds are stacked against them.”
“We continue to receive numerous investor complaints involving binary options websites. If you have trouble withdrawing your money from an online binary options trading platform, be aware that you may be the victim of a scam and should not give the platform any more money,” added Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy, in an accompanying statement.