April 18, 2018
CFTC Charges Multiple Individuals and Companies with Operating a Fraudulent Scheme Involving Binary Options and a Virtual Currency Known as ATM Coin
U.S. District Court for the Eastern District of New York Issues Emergency Order Freezing Defendants’ Assets and Granting the CFTC Immediate Access to Defendants’ Books and Records
Washington DC – The Commodity Futures Trading Commission (CFTC) announced the filing of a Complaint in the U.S. District Court for the Eastern District of New York charging Defendants Blake Harrison Kantor, who frequently uses the alias Bill Gordon, and Nathan Mullins, both of New York, and the entities Blue Bit Banc, located in the United Kingdom, Blue Bit Analytics, Ltd. (Analytics) located in Nevis, Turks, and Caicos, and Mercury Cove, Inc. and G. Thomas Client Services (G. Thomas), both New York corporations, with operating a fraudulent scheme involving binary options and a virtual currency known as ATM Coin.
The CFTC’s Complaint, filed on April 16, 2018, also charges Blue Wolf Sales Consultants, a New York company owned by Kantor, as a Relief Defendant for receiving customer funds. In addition, the CFTC’s Complaint charges Kantor, Blue Bit Analytics, and G. Thomas Client Services with accepting customer funds and illegally acting as Futures Commission Merchants without being registered with the CFTC. The Complaint also alleges that the Defendants acted as a common enterprise in carrying out their fraudulent scheme.
U.S. District Court Judge Sandra J Feuerstein on April 17, 2018, entered a Statutory Restraining Order freezing the Defendants’ and Relief Defendant’s assets, prohibiting them from destroying their books and records, and granting the CFTC immediate access to those records. The Court has scheduled a hearing for April 26, 2018, to determine, among other things, whether to enter an order for preliminary injunction against the Defendants and continue the freeze on Defendants’ assets. On April 16, 2018, the United States Attorney for the Eastern District of New York filed a parallel criminal action, which charges Kantor with fraudulent conduct, including conduct that is the subject of the CFTC’s action. See United States v. Blake Kantor aka Bill Gordon, Case No. 18 CR 177 (E.D.N.Y.).
CFTC’s Director of Enforcement Comments
James McDonald, the CFTC’s Director of Enforcement, commented: “As this action shows, the CFTC is continuing its efforts to root out fraud in our markets. To achieve this goal, we will work closely and in parallel with our law enforcement partners, which is particularly important in cases like this one, where the Defendants allegedly sought to make their fraudulent scheme more difficult to detect by stretching it across multiple markets, including a virtual currency known as ATM Coin.”
U.S. Attorney Richard Donohue Comments
“As alleged, Kantor used a computer program to generate manipulated data to cheat hundreds of investors out of their hard-earned savings,” stated U.S. Attorney Donoghue. “To cover-up his fraudulent scheme, Kantor then lied to the FBI and ordered the alteration of documents that would assist agents in identifying his victims. We will continue to work closely with our law enforcement partners to vigorously prosecute individuals who defraud the investing public and obstruct law enforcement’s ability to detect and prosecute financial crimes.”
Defendants’ Fraudulent Scheme
Binary options are transactions that allow customers to make predictive trades as to whether the price of a certain commodity will rise or fall by a certain date and time. As alleged in the CFTC’s Complaint, binary options must be traded on a registered board of trade in order to be lawfully offered in the United States. The Complaint alleges that none of the Defendants execute transactions on a registered board of trade and none has ever been registered with the CFTC in any capacity.
The Complaint alleges that since at least April 2014 and continuing to the present, the Defendants have solicited potential customers through emails, phone calls, and a website to purchase illegal off-exchange binary options. According to the Complaint, Defendants falsely claimed customers’ accounts would generate significant profits based upon Kantor’s purported past profitable trading. Also according to the Complaint, Defendants misappropriated a substantial amount of the customer funds for the Defendants’ own personal use.
Defendants sought to cover up their misappropriation by inviting customers to transfer their binary options account balances into a virtual currency known as ATM Coin. According to the Complaint, some customers agreed to transfer their funds into ATM Coin, and at least one customer sent additional money to Defendants to purchase additional ATM Coin. Defendants then allegedly misrepresented to customers that their ATM Coin holdings were worth substantial sums of money.
In its continuing litigation, the CFTC seeks restitution to defrauded customers, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and permanent injunctions from future violations of the Commodity Exchange Act and CFTC Regulations, as charged.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of New York, the FBI’s New York Field Office, and IRS-Criminal Investigation.
This case is brought in connection with the CFTC Division of Enforcement Virtual Currency Task Force, and the staff members responsible for this case are Susan Padove, Joseph Patrick, David Terrell, Scott Williamson, and Rosemary Hollinger.
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CFTC’s Recent Customer Fraud Advisories
- CFTC’s Customer Fraud Advisory on Virtual Currencies and Bitcoin
The CFTC has issued a Customer Advisory on the Risks of Virtual Currency Trading to inform the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options. See additional bitcoin information, including a warning on Pump & Dump schemes. The CFTC has also issued several other customer protection Fraud Advisories that provide the warning signs of fraud.
- CFTC’s Binary Options Customer Fraud Advisory and “RED” List
The CFTC has issued a Consumer Alert to warn about fraudulent schemes involving binary options and their trading platforms. The Alert warns customers that the perpetrators of these unlawful schemes allegedly refuse to credit customer accounts, deny fund reimbursement, commit identity theft, and manipulate software to generate losing trades. (See the CFTC’s “RED Lists” [Registration Deficient Lists] information in the following CFTC Press Releases: 7224-15 September 9, 2015; 7363-16 April 18, 2016; 7551-17 April 25, 2017; and 7663-17 December 15, 2017.)
- How to Report Suspicious Activities or Information to the CFTC
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.