CFTC, binary options marketers clash over evidence in fraud case
The CFTC admits that it has not identified trades placed by binary options autotrading systems sold or promoted by Zilmil, as such trades are placed on illegal, unregistered internet-based exchanges.
Legal proceedings against binary options fraudsters are extremely tricky, as shown by the case Commodity Futures Trading Commission v. Scharf et al (3:17-cv-00774). The lawsuit, launched in July last year, targets a number of binary options firms, such as Citrades.com and AutoTradingBinary.com, as well as their affiliate marketers Zilmil and Zimil’s owner Michael Shah.
According to the allegations, 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.
The binary options marketers, apparently, are not giving up without a fight. The latest documents submitted with the Florida Middle District Court and made available to FinanceFeeds on Tuesday, January 16, 2018, illustrate the disagreements between the CFTC and Zilmil over evidence in this case.
The CFTC has responded in detail to 94 requests for admissions made by Zilmil. Most of the requests are denied but the document illustrates how difficult it is to gather evidence and actually prosecute binary options firms and their affiliates. The task is apparently challenging even for a US regulator such as the CFTC.
In its responses, the CFTC explains that whether Zilmil’s activities in violation of the Act and Regulations relate to or involve non-US persons is irrelevant to any claim or defense in this action. The regulator notes that the activities conducted by Zilmil constitute “U.S. activity” because Zilmil is located in the U.S. The regulator emphasizes that documents produced by Revcontent show that Zilmil targeted persons in the U.S. as well as persons in other countries.
Identifying binary options trades is particularly challenging. In the document submitted with the Court, the CFTC admits that it has not identified trades placed by autotrading systems sold or promoted by Zilmil. This is because such trades are placed on illegal, unregistered internet-based exchanges, the regulator says.
Zilmil has insisted that the CFTC must “admit that you are unable to identify any advice provided by Zilmil that was based upon knowledge of or tailored to a particular trading account or trading activity”. The CFTC objects to this request on the grounds that the phrase “advice … based upon knowledge of or tailored to a particular trading account or trading activity” is vague, ambiguous, and susceptible to multiple interpretations. Subject to and notwithstanding the CFTC’s objections, the CFTC cannot truthfully admit or deny this request because Zilmil has failed to produce any documents evidencing how its autotrading systems work.
The CFTC also notes that it has not been able to interview or request documents from the many persons who purchased or signed up for binary options autotrading systems sold or promoted by Zilmil.
Regarding the gathering of information from the websites involved, Zilmil has requested that the CFTC must “admit that you are unable to identify any evidence that Zilmil owned the domain or web hosting for the funnels alleged in the SRO, page 17, including but not limited to www.millionairemoneymachine.co; www.7daymillionaire.co; www.moneyplatform.net; www.binaryboom.co; and www.binarymachine.co”.
The CFTC cannot truthfully admit or deny this request because the CFTC has not yet subpoenaed all domain name registrars or webhosts used by Zilmil. The CFTC, however, denies that it is unable to forensically capture or otherwise obtain content from the websites in the URLs listed in this request.
In conclusion, however, the CFTC denies that it is unable to identify individuals who were directed to a binary options website as a result of Zilmil’s affiliate marketing activities.
The complicated arguments between the CFTC and Zilmil are in line with what the Court-appointed Receiver in this case has said. Earlier this month, he stated that he has faced more challenges and obstacles in identifying and confirming the customers and operations of the Zilmil defendants than in identifying and confirming the customers and operations of the Citrades defendants.
