A single US-based binary options operator was hit with over $22 million penalties for defrauding his American victims through numerous websites based in Israel, as well as violating the Commodity Exchange Act.
The US Commodity Futures Trading Commission today announced the final judgment order by a Florida federal court against online advertiser Michael Shah and his company Zilmil, Inc. Shah, who worked in tandem with call centers in Israel in return for large commissions, sent traffic to binary options sites including LBinary, TraderXP, Trade Rush, Banc de Binary and OptionRally.
The CFTC originally asked the court to order the defendants to pay back over $75 million in fines and penalties.
The penalties, in this case, are the largest the US authorities have imposed so far against binary options operators. The case unfolded last year, just as Finance Magnates exclusively reported on a major crackdown by the US regulators against the binary options industry.
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The court papers state that Shah and his company Zimil Inc. were the “mastermind of an extremely lucrative Internet scam involving so-called binary options.” In addition, the description of Shah’s activities included that he acknowledged in chat messages and emails that the trading systems he promoted were fraudulent.
Fraudulent campaigns to promote binary options systems
The detailed complaint alleges that the fraud scheme has been going on since at least 2013 through July 2017, and 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.
The CFTC further explains: “The defendants sent more than 60 million mass emails to more than 1.4 million unique email addresses in just one seven-month period. The emails contained false and misleading statements about the performance of the trading systems – for example, that customers could make “millions” with the systems. During the Relevant Period, the defendants made more than $17.8 million from the sale of its autotrading systems and commissions from the binary options websites.”
Because Shah and his affiliate marketers in the United States were not registered as a “designated contract market, exempt board of trade or bona fide foreign board of trade,” the court’s order states, the binary-options deals they proposed “constituted unlawful off-exchange options.”