July 28, 2016
Federal Court Orders Israeli Web-based Firms, Vault Options, Ltd. and Global Trader 365, to Pay More than $4.5 Million for Unlawful Off-Exchange Binary Options Trading, Fraud, and Registration Violations
CFTC Obtains Default Judgment and Permanent Trading Ban against the Two Binary Options Trading Firms
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge John Z. Lee of the U.S. District Court for the Northern District of Illinois entered an Order of Final Judgment by Default (Order) that requires Defendants Vault Options, Ltd. (Vault) and Global Trader 365 (GT 365), two Israeli web-based binary options firms, to jointly and severally pay a $3 million civil monetary penalty and $1,587,731 in restitution to their defrauded customers. The Court’s Order also imposes permanent injunctions and permanent trading bans against the two entities.
The Order, entered on July 20, 2016, and stemming from a CFTC Complaint filed on February 2, 2016 (see CFTC Complaint and Press Release 7341-16), finds that Defendants violated the Commodity Exchange Act’s ban on off-exchange options trading and off-exchange swaps trading by offering to enter into and entering into binary commodity option contracts with retail U.S. customers. The Order also finds that Defendants defrauded customers by making false representations in their solicitations and misappropriating their funds.
The Order finds that binary options are financial products that allow customers to predict whether the price of a certain commodity, index or foreign currency “asset” will go “up” or “down” at a future date and/or time. According to the Order, neither of the Defendants was registered as a designated contract market, exempt board of trade or bona fide foreign board of trade, and the binary options transactions the Defendants offered therefore constituted unlawful off-exchange options and unlawful swaps. According to the Order, Defendants nonetheless solicited and accepted at least $1.6 million from U.S. customers from 22 states for the purpose of entering into these unlawful off-exchange binary options contracts.
The Order further finds that Defendants defrauded their customers by, among other acts and practices, knowingly or recklessly claiming that customers can make large profits, when, in fact, many Vault and GT 365 customers quickly lose most of their funds trading Defendants’ binary options. The Order further finds that Defendants falsely represented to customers that their funds were insured against losses, failed to respond to customer inquiries about the status of their funds, and ultimately misappropriated the customers’ funds.
The Order also finds that Defendants operated as unregistered Futures Commission Merchants by soliciting and accepting binary options orders and funds from U.S. customers and by confirming the execution of such orders.
The CFTC cautions victims that Orders requiring repayment of funds to victims 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 the wrongdoers are held accountable.
The CFTC’s Enforcement Division also 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 action are Camille Arnold, Heather Dasso, Mary Elizabeth Spear, Mary Lutz, Joseph Konizeski, Scott R. Williamson, and Rosemary Hollinger.
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See 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.
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: July 28, 2016