March 15, 2016
CFTC Charges Two Binary Options Firms with Fraud, Illegal Off-Exchange Activity, and Operating in an Unregistered Capacity
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that a federal district court has unsealed a civil Complaint that the CFTC filed with the Northern District of Illinois on February 2, 2016, against two foreign web-based binary options firms, Vault Options, Ltd. (Vault) and Global Trader 365 (GT 365), both Israeli web-based companies. The CFTC’s Complaint alleges that the two firms unlawfully solicited and accepted more than $1 million from at least 50 U.S. customers to trade off-exchange binary options contracts, defrauded those customers, and operated as unregistered Futures Commission Merchants (FCMs).
According to the CFTC’s Complaint, since at least October 2012 and continuing to the present, Vault and GT 365 have operated websites through which U.S. customers can buy and sell binary options on various commodities, foreign currency pairs, and stock indexes. The Complaint states that the binary options are two-way directional options that allow customers to make predictive trades as to whether the price of a certain commodity will rise or fall. According to the Complaint, to be lawfully offered in the United States, binary options must be traded on a registered board of trade. However, the Complaint alleges that Vault and GT 365 did not execute transactions on a registered board of trade and neither Vault nor GT 365 has ever been registered with the CFTC in any capacity. As a result, the Complaint charges Vault and GT 365 with operating as FCMs, without being registered.
In addition to alleging that Vault and GT 365 solicited more than $1 million from at least 50 U.S. customers, the Complaint alleges that Vault and GT 365 defrauded their customers by, among other things, misrepresenting and omitting the likelihood of profit and loss that customer make trading binary options, falsely claiming that customer funds were insured against losses, fraudulently inducing customers to send them more money before initial funds could be returned, and misappropriating customer funds. According to the Complaint, while Vault and GT 365’s websites touted large profits, many customers lost nearly all of their funds sometimes within days or a few weeks.
The CFTC appreciates the assistance of the Israeli Securities Authority, the Cyprus Securities and Exchange Commission, and the Ontario Securities Commission.
CFTC Division of Enforcement staff members responsible for this case are Camille M. Arnold, Judith McCorkle, Mary Beth Spear, Heather Dasso, Joseph Konizeski, Scott Williamson, and Rosemary Hollinger.
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See Binary Options Customer Fraud Advisory and the CFTC’s “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.
Also, see CFTC Press Release 7224-15, September 9, 2015: CFTC Publishes List of Foreign Entities that Illegally Solicit U.S. Residents to Trade Foreign Currency and Binary Options; The New Registration Deficient ‘RED List’ Identifies Companies Operating Illegally.
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.
Last Updated: March 15, 2016