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 and, 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.

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