CFTC fails to secure entry of default against Yossi Herzog, Shalom Peretz, and Yukom Communications
The US regulator has managed to secure entries of default against some of the defendants in a lawsuit targeting Israeli binary options fraudsters.
The action brought by the United States Commodity Futures Trading Commission (CFTC) against the raft of entities and individuals involved in the binary options scheme evolving around Israel-based Yukom Communications continues at the Illinois Northern District Court.
On Tuesday, July 14, 2020, a hearing was held before the Honorable Andrea R. Wood. The main issue discussed was the motion by the CFTC for entries of default against a number of the defendants in the case.
The CFTC’s motion for entry of default was granted in part and denied in part. The motion was granted as to Linkopia Mauritius Ltd, Wirestech Limited, WSB Investment Ltd, Zolarex Ltd., and Lee Elbaz. The Court entered default pursuant to Fed. R. Civ. P. 55(a) as to those defendants.
The motion, however, was denied without prejudice as to Yossi Herzog, Shalom Peretz, and Yukom Communications Ltd.
The Court granted CFTC’s oral motion to modify the prior service order. Herzog, Peretz, and Yukom will be deemed served on the latter of (1) the date when the summons and complaint were sent to their last known address by ordinary mail; (2) the date the summons and complaint were sent to the email address they have used in the past; or (3) 90 days after the publishing of notice in the Times of Israel.
The next status hearing is set for November 5, 2020.
Let’s recall that this action was filed by the CFTC in August 2019, with the regulator charging five entities and four individuals with fraud relating to a global retail binary options enterprise that victimized U.S. Residents.
According to the CFTC’s complaint, from March 2014 through the present, the defendants fraudulently solicited and accepted more than $103 million in connection with their binary options trading scheme. As alleged in the complaint, the defendants have solicited individuals located throughout the U.S. and elsewhere to trade binary options through internet trading websites. The complaint further charges that the defendants have falsely stated that the binary options offered by the five defendant entities are actual transactions subject to objective market conditions when, in fact, they are mere book entries whose outcomes can and have been manipulated to force customer losses.
The complaint also alleges that the defendants falsely state that the interests of the defendant entities are aligned with the interests of customers, when in fact the entities are on the opposite side of each binary option trade and therefore profit from customer losses. The complaint further alleged that the defendants falsely represent that the binary options being offered are profitable, when in fact approximately 95 percent of their customers lose money.
The complaint also alleges that the defendants misrepresent the financial expertise, physical location, and identity of the individual “brokers” who solicit and sell binary options and that the brokers have routinely and consistently used high pressure sales techniques when soliciting customers to deposit funds with the foreign entities.
The complaint further charges that the defendants have engaged in various activities to conceal the true nature of their binary options enterprise, including setting up various foreign nominee entities to enter into agreements and open off-shore bank accounts through which customer funds are transferred, concealed, and ultimately misappropriated. Additionally, the defendants have utilized various manipulative or deceptive devices, including so-called “bonuses” and “risk free” trades, and artificially manipulated the results of binary option trades to force customer losses and ultimately prevent customers from withdrawing funds. The complaint also charges the defendants with acting as futures commission merchants without registering as such, as required by CFTC regulations.
In its continuing litigation against the defendants, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution for the benefit of customers, permanent registration and trading bans, and a permanent injunction from future violations of the Commodity Exchange Act.