A husband and wife have been banned for life from Nadex, the North American Derivatives Exchange, for operating a money-pass scheme to improperly transfer funds, according to a disciplinary notice issued on Friday.
James Groves and his wife Georgiana Chiuc electronically executed numerous non-competitive transactions at Nadex on May 10, 2016. James allegedly caused losses at his client’s accounts to benefit Chiuc in a so-called money pass scheme.
Money pass involves making simultaneous buy and sell orders without incurring any market risk. Specifically, the exchange found that the couple entered equal and opposite transactions on the same contracts. Nadex, which is the only legal venue to trade binary options and spreads in the US, bars the practice.
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The plot was discovered when the Compliance Department noticed that suspicious activity had occurred between the two member accounts. It then contacted and questioned the individual named as the account owner of the losing side of the transactions over the unusual activity. The victim stated that he had given access and trading control over his account to James Groves, whom he believed to be an experienced trader and familiar with Nadex rules.
A Nadex panel found that the couple entered into 28 trades together, a total of 1,451 contracts, despite the fact that the exchange’s dedicated market maker was present and active. The money pass scheme, which helped Chiuc gain more than $43,238.90, was fraudulent and violated the Nadex ban on noncompetitive and falsified trading.
As sanctions, Ms. Chiuc and Mr. Groves were each permanently barred from trading Nadex products and have had their memberships revoked. In addition, they have each been ordered to pay a $500 fine to Nadex, along with restitution and disgorgement for the improper gains.
Nadex is a regulated US derivatives exchange which most US investors use to trade binary options. In the United States, all binary options have to be traded on a regulated exchange since the watchdog banned OTC brokers from the continent. The firm, which provides investors with the opportunity to trade stock indices, forex, commodities, economic events and Bitcoin, is authorised by the CFTC as a Designated Contract Market and Derivatives Clearing Organisation.