CFTC clamps down on international fraudulent binary options scheme

The United States Commodity Futures Trading Commission (CFTC) continues its crackdown on binary options fraud. On May 5, 2020, the regulator filed a complaint against a number of individuals and entities allegedly involved in a large-scale international binary options scam.

The lawsuit, filed at the Florida Southern District Court, targets firms based in the United States, Israel and Bulgaria. The list of defendants includes Itay Barak, Aicel Carbonero, Digital Platinum Inc, Digital Platinum Ltd., Daniel Fingerhut, Huf Mediya, and Tal Valariola.

According to the CFTC’s complaint, seen by FinanceFeeds, throughout the period of at least October 2013 and continuing through at least August 2018 (“Relevant Period”), two massive fraudulent solicitation schemes occurred, one involving binary options and the other digital assets, including Bitcoin and Ethereum. The binary options fraud occurred between at least October 2013 and November 2016 (“Binary Options Period”); the digital assets fraud occurred between at least October 2016 and August 2018 (“Digital Assets Period”).

During the Binary Options Period,Digital Platinum Limited (DPL), through its control persons, Tal Valariola and Itay Barak, aided and abetted All In Publishing LLC’s (AIP) fraudulent binary options affiliate marketing scheme that involved tens of millions of solicitations to prospective customers advising them to open and fund off-exchange binary options trading accounts involving Forex, metals, and/or swaps through websites operated by unregistered, off-exchange binary options brokers who paid AIP and DPL commissions. AIP’s solicitations offered free access to trading systems that traded binary options automatically on behalf of customers once they opened and funded an account with the recommended broker.

AIP’s binary options marketing scheme involved at least 24 fraudulent binary options campaigns, which DPL aided and abetted by, inter alia, willfully providing fraudulent sales videos that they procured for AIP’s campaigns, knowing solicitations that AIP created themselves included false or misleading statements, sharing AIP’s fraudulent solicitations with brokers and encouraging brokers to use the false or misleading statements in their further solicitations, supplying the trading systems that they knew did not operate as marketed, acting as an intermediary with brokers, and managing the funds resulting from their campaigns.

The CFTC alleges that Daniel Fingerhut, a resident of Miami Beach, Florida, created and disseminated fraudulent solicitations related to binary options on behalf of AIP. Between October 2016 and August 2018, Fingerhut managed the marketing at DPI and at its related entities, DPL and Huf, and created, disseminated, and oversaw others creating and disseminating fraudulent solicitations related to digital assets and digital assets options. Fingerhut has never been registered with the Commission in any capacity.

Digital Platinum Ltd. (DPL) is an Israeli company with its principal place of business in Tel Aviv. Between at least October 2013 and November 2016, DPL willfully aided and abetted AIP, where Fingerhut worked, to carry out the binary options fraud. DPL, through Valariola and Barak, acted as the intermediary between AIP and the recommended brokers, was responsible for the backend operations of the affiliate marketing campaigns, collected and distributed commission payments, procured sales videos for AIP to use in its campaigns, and supplied the marketed Trading Systems, among other things.

Huf Mediya Ltd. (a.k.a. Hoof Media Ltd.) is a Bulgarian company. Huf, DPL, and DPI are related entities, and Valariola and Barak are control persons of all three entities. Huf has never been registered with the CFTC in any capacity.

Digital Platinum, Inc. (DPI) is an inactive Florida corporation organized on April 15, 2016 and located in Hollywood, Florida. The officers and directors of DPI include Barak and Valariola. DPL is the parent company of DPI. DPI has never been registered with the CFTC in any capacity.

Tal Valariola is a resident of Tel Aviv, Israel. At all relevant times, Valariola owned and/or controlled DPL, DPI, and Huf. Between at least October 2013 and November 2016: he provided AIP with sales videos that depicted fictitious testimonials and trading results; knew that AIP created similar false or misleading solicitations and widely disseminated them to potential customers; shared AIP’s false or misleading solicitations with brokers to assist their efforts to further induce prospective customers to open and fund an account; supplied the marketed trading software (which did not perform as promised), served as the intermediary with brokers; and managed funds and results of campaigns related to the scheme.

Between at least October 2016 and August 2018, Valariola, on behalf of DPL, DPI, and Huf, directed, approved, and participated in the digital assets solicitation scheme, including by retaining Fingerhut to manage the affiliate marketing component of the scheme that included generating false or misleading solicitations and widely disseminating them to potential customers. Valariola, on behalf of DPL, DPI, and Huf, also directly or indirectly supplied the marketed trading software (which did not perform as promised), served as the intermediary with brokers, and managed funds related to the scheme. Valariola has never been registered with the CFTC in any capacity.

Itay Barak is a resident of Tel Aviv, Israel. Between at least October 2013 and November 2016, Barak, on behalf of DPL, directly or indirectly provided sales videos that depicted fictitious testimonials and trading results to AIP, knew that AIP created similar false or misleading solicitations and widely disseminate them to potential customers, supplied the marketed trading software (which did not perform as promised), served as the intermediary with brokers, and managed funds and results of campaigns related to the scheme. Between at least October 2016 and August 2018, Barak, on behalf of DPL, DPI, and Huf, directed, approved, and participated in the digital assets solicitation scheme, including by retaining Fingerhut to manage the affiliate marketing component of the scheme that included generating false or misleading solicitations and widely disseminating them to potential customers.

Barak, on behalf of DPL, DPI, and Huf, also directly or indirectly supplied the marketed trading software (which did not perform as promised), served as the intermediary with brokers, and managed funds related to the scheme. Barak has never been registered with the CFTC in any capacity.

All In Publishing, LLC (AIP) is a Florida limited liability company with its principal place of business in Miami, Florida. AIP became inactive after the Binary Options Period. AIP has never been registered with the CFTC in any capacity.

According to the CFTC, tens of millions of individuals received AIP’s and Digital Platinum Defendants’ fraudulent solicitations and the fraudulent campaigns were successful.

For instance, between January 2014 and June 2016, at least 51,917 new customers, some of which were US customers, opened and funded binary options trading accounts at brokers in connection with fraudulent campaigns that DPL aided and abetted; at least 42,945 of those customers opened and funded binary options trading accounts in connection with fraudulent campaigns that Fingerhut participated in from June 2014 to June 2016.

During the Digital Assets Period, at least 8,043 customers opened and funded digital assets or digital assets options trading accounts at brokers in connection with Digital Platinum’s fraudulent campaigns that Fingerhut participated in.

The amount of money customers deposited when opening a new account varied. For the binary options and digital assets campaigns, customers were generally required to deposit at least $250 initially. Therefore, the 51,917 customers that opened new binary options trading accounts at brokers between January 2014 and June 2016 deposited at least $12,979,250 in trading accounts as a result of AIP’s fraudulent solicitations. Similarly, the 8,043 customers that opened new digital assets trading accounts between October 2016 and August 2018 deposited at least $2,010,772.95 as a result of Digital Platinum Defendants’ fraudulent solicitations.

Brokers paid DPL and AIP a flat commission for each new funded binary option account opened as a result of AIP’s fraudulent solicitations and DPL and AIP split the commission between them. Between October 2013 and November 2016, DPL paid AIP $17,300,780.50 for the binary options campaigns they launched together. AIP deposited over $154,956 into Fingerhut Group’s bank account for Fingerhut’s services during the Binary Options Period.

Between October 2016 and August 2018, DPI received $3,619,391.31 in payments for its digital assets affiliate marketing activities, primarily from an account in the name of Huf. The money deposited in a United States account in DPI’s name represents only a portion of the commissions DPL and/or Huf earned as a result of DPI’s fraudulent solicitations.

In this action, the CFTC seeks injunctions against the defendants, disgorgement of ill-gotten gains, restitution and civil monetary penalties.