The United States financial market regulator has moved against binary options company, Spot Option and its two operators, Malhaz Pinhas Patarkazishvili (Pini Peter) and Ran Amiran for running illegal operations in the country and deceiving investors.
The lawsuit filed by the Securities and Exchange Commission (SEC) in a Nevada court on April 16 alleged that Spot Option, Ltd., now known as Spot Option Tech House, Ltd., operated in the US from at least April 2012 through August 2017.
The binary options scheme onboarded thousands of US-based investors, including retirees, who lost hundreds of thousands of dollars from their retirement savings, while the company raked in millions.
A Well Planned Fraudulent Operation
The company contracted with local third parties, which were called ‘Partners’, ‘White Labels’ or ‘Brands’, to market its investment scheme in the country and persuaded investors to trade the binary options that it issued through its proprietary online trading platform.
The SEC alleged that the company structured its business model in such a way that the so-called ‘Partners’ were counterparty in every trade, and they made money at the loss of the investors.
Though the Spot Option trained its partners to market the binary options as profitable investments, the payout terms on the options were set in such a way that most of the investors were likely to lose all or a substantial portion of their investment within the first five months.
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Additionally, the binary options operator manipulated the trading platform to increase profitability on losing trades and offered investors a ‘bonus’ to lock up their funds and prevent withdrawals. According to SEC, virtually guaranteed investor losses when the terms of the company were combined.
Spot Option’s offerings mostly include binary options with securities as the underlying financial assets. Thus, the SEC is charging the company for illegally selling securities without any authorization.
Headquartered in Israel, Spot Option was a big binary options name in the European markets. The company officially stopped offering all binary options in January 2018.
“Spot Option’s trading platform allegedly supported a worldwide binary options fraud,” said Jennifer Leete, associate director at SEC’s enforcement division. “This action shows that the SEC will work with its foreign regulatory partners to pursue international actors who defraud U.S. investors.”
The court documents alleged Peter, who was the Executive Chairman, Director, and CEO of Spot Options during its US operations, to be the chief architect of the scheme’s business model and plans. Amiran was the Head of Business Development, President, and Director, who later took over the company as CEO. Both of them are now residing in Israel, according to the lawsuit.
“The SEC seeks disgorgement of Defendants’ ill-gotten gains, prejudgment interest, civil monetary penalties, an injunction against further violations of the federal securities laws as to all Defendants, a specific conduct-based injunction as to the individual defendants, and other appropriate relief,” the regulator stated in the lawsuit.