CFTC asks Florida Court to withdraw binary options fraud case from mediation

Maria Nikolova

The parties in the case against Citrades and Zilmil, which are alleged to have misappropriated more than $16 million in customer funds, believe that mediation would not be fruitful at this time.

The legal proceedings in the binary options fraud case captioned Commodity Futures Trading Commission v. Scharf et al (3:17-cv-00774) continue at the Florida Middle District Court. The defendants in the case include Jason B. Scharf, doing business as Citrades.com and AutoTradingBinary.com, his companies CIT Investments LLC, a Nevada limited liability corporation; Brevspand EOOD, a Bulgarian business entity; CIT Investments Ltd., a Marshall Islands business entity; CIT Investments Ltd., an Anguillan business entity; and A & J Media Partners, Inc., a California corporation. The case also names their affiliate marketers Zilmil and its owner Michael Shah among the defendants.

Following the Court reference of the case to mediation on September 28, 2017, the CFTC has moved for withdrawal of this reference. On Monday, October 23, 2017, the CFTC filed a Motion with the Court, stating that Counsel for the parties have conferred, and agree that mediation would not be fruitful at this time.

The CFTC notes that the case is in an early stage, and the Parties believe that additional discovery is required before the Parties can consider any potential settlement. Accordingly, the CFTC requests that the Court withdraw the reference to the mediator.

According to the allegations, from June 2013 through the present the Citrades Defendants operated a massive scam in which they fraudulently solicited customers to enter into illegal, off-exchange investments in binary options. The firms received at least $16 million in customer funds.

Similarly, the Court found that there is good cause to believe that during the same time period, the Zilmil Defendants acted as third-party ‘affiliate marketers’ who drove internet traffic to the Citrades Defendants by fraudulently soliciting customers to sign up for or purchase binary options autotrading systems. They instructed the customers to send money to the Citrades Defendants and made gross revenues of more than $4 million from sales of its autotrading systems and another $500,000 in commissions from the Citrades Defendants.

In September, Kenneth Dante Murena, named Permanent Receiver in the enforcement action, published his initial report showing that that $7,381,366.29 in funds held in accounts at multiple financial institutions have been frozen pursuant to the Statutory Restraining Order and Preliminary Injunctions.

Of those funds, $7,381,148.82 were in accounts of the Zilmil Defendants, and $217.46 were in accounts of the Citrades Defendants. The Receiver has effected the transfer of some $3.45 million of those funds to the fiduciary accounts he opened for the Receivership Estate.

The Statutory Restraining Order required the Defendants, within five business days following the service of the Order, to provide the Receiver with a detailed accounting of all their funds, assets, and documents, to transfer all assets to the control of the Receiver, and to provide the Receiver with access to records of all their accounts or assets. To the date of publication of the report, however, the Defendants have provided limited financial information to Mr Murena, but have not provided him with an accounting of their assets.

Indeed, none of the Defendants have submitted their financial disclosures, or provided the Receiver with financial records other than certain bank statements, and they have not satisfied the production requirement in the Court’s orders, invoking their Fifth Amendment right against self-incrimination.

Read this next

Digital Assets

Germany-focused DekaBank taps METACO for digital asset custody offering

“Digital assets are a critical part of the future, a radical new way for how assets will be represented, from currencies to real estate.”

Technology

Eventus launches AML solution for TradFi and digital asset space

“Firms operating in traditional financial markets and digital assets alike are facing greater challenges than ever to protect themselves from those presenting a risk to their businesses and reputations, along with their standing with government regulators.”

Industry News

Qomply launches direct-to-FCA trade report solution that bypasses ARM

“Certainly, for back-reporting large volumes of data, QomplyDirect removes extra ARM fees by offering the flexibility of sending reports directly to the FCA via a firm’s own infrastructure.”

Executive Moves

BNP Paribas AM appoints Geoff Dailey as Deputy Head of US Equities

“Geoff has more than 20 years’ experience in the industry and as a key, senior member of the team with a strong investment pedigree and leadership profile, he is the natural successor for Pam.”

Retail FX

BUX joins forces with BlackRock for iShares ETFs offering in 7 European countries

“By joining forces with Blackrock, a renowned expert in financial markets and products, we have created a good solution for clients that are overwhelmed by the choice of products and don’t know how and when to start investing. Together, BUX and BlackRock can make a real impact on how Europeans invest and approach their financial future.”

Retail FX

CMC Invest gets in-principle approval to launch shares, ETFs, futures, and options in Singapore

“This announcement is a major milestone and validation for CMC Markets. Our business has been offering CFDs in Singapore since 2007, but the Capital Markets Services Licence for CMSI will allow us to serve our clients with more robust investment products, including shares and ETFs.”

Executive Moves

Eightcap hires ex-IG, ex-StoneX Alex Howard as CEO

“In my first weeks, the priority is to immerse myself in the business, including connecting with the global team, developing a nuanced understanding of strategy and operations, and listening to clients.”

Digital Assets

OneCoin founder Ruja Ignatova is selling penthouse in UK

OneCoin founder Ruja Ignatova, who steered one of the world’s biggest cryptocurrency frauds, is back into the spotlight more than five years after vanishing from the public eye.

Digital Assets

Bitpay taps MoonPay to offer access to +60 cryptocurrencies

Crypto payment service provider Bitpay said it’s partnering with exchange and web3 infrastructure provider MoonPay to provide its users with easier access to buy cryptocurrency instantly.

<