Release Number 8375-21

Federal Court Orders Alabama Company and its Owner to Pay Over $1.1 Million for Commodity Pool Fraud

April 07, 2021

— The Commodity Futures Trading Commission today announced that Judge Liles C. Burke of the U.S. District Court for the Northern District of Alabama entered a default judgment against Negus Capital Incorporated (NCI) of Muscle Shoals, Alabama finding that it, through its owner Aaron B. Butler, engaged in fraudulent solicitation, misappropriation, and registration violations in connection with binary options trading.

The court’s March 31, 2021 order requires NCI to pay $294,545 in restitution to defrauded customers and a civil monetary penalty of $883,635. The order also permanently enjoins NCI from engaging in conduct that violates the Commodity Exchange Act and CFTC regulations, registering with the CFTC, and trading in any CFTC-regulated markets.

The court’s order stems from a 2019 enforcement action that charged Butler and NCI with fraudulent solicitation, misappropriation, and registration violations. [See CFTC Press Release No. 8070-19] The court previously entered an order granting a permanent injunction against Butler and requiring him to pay a combined $755,000 in restitution and civil monetary penalty for his violations of the Commodity Exchange Act and CFTC regulations. [See CFTC Press Release No. 8184-20]

The order finds that from March 16, 2017, through February 21, 2018, NCI, through Butler, unlawfully solicited and accepted $294,545 from 70 members of the public to trade binary options contracts on the North American Derivatives Exchange (Nadex), defrauded those customers, and operated as an unregistered commodity pool operator.

Case Background

The order finds that NCI, through Butler, misrepresented that for customer deposits between $500 and $5,000, he would pool those customers’ funds into a single trading account at Nadex, and Butler, acting as the trader for NCI, would use those funds to trade binary options on the customers’ behalf. The order also finds that NCI, through Butler, misrepresented that it would deposit each customer payment of $5,000 or more into separate customer trading accounts at Nadex, and Butler would manage and trade binary options on behalf of customers. Rather than trade customer funds as promised, NCI instead misappropriated most, if not all of the funds for Butler’s personal benefit, including spending tens of thousands of dollars on jewelry, purchases at Apple stores, and Toys “R” Us gift cards.

The CFTC cautions victims that restitution orders may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure wrongdoers are held accountable.

The CFTC thanks the Alabama Securities Commission for its assistance in this matter.

The Division of Enforcement staff members responsible for this case are James Deacon, Kevin Samuel, Erica Bodin and Rick Glaser.