The settling defendants will have to disgorge all ill-gotten gains and to comply with a Permanent Injunction.
The United States Commodity Futures Trading Commission (CFTC) on Thursday filed a Proposed Order to settle its claims against some of the defendants in a binary options fraud case at the Florida Middle District Court. The regulator respectfully requests that the Court enter the proposed Consent Order of Permanent Injunction and Other Statutory and Equitable Relief against Defendants Jason B. Scharf (doing business as Citrades.com and Autotradingbinary.com) and A & J Media Partners, Inc.
Let’s recall that the CFTC Complaint charges the defendants with acting as Futures Commission Merchants (FCM) and Commodity Trading Advisors (CTA) without registration, as well as with soliciting more than $16 million in connection with illegal binary options contracts. The Complaint details the fraudulent practices of the above-mentioned binary options firms, including promises of artificially high returns, bonuses and happy life, followed by halt of any communication once money was deposited.
To effect partial settlement of the matters alleged in the Complaint against Jason B. Scharf and A & J Media Partners, Inc. without a trial and on the merits or any further judicial proceedings, the settling Citrades defendants agree to the entry of the Consent Order of Permanent Injunction and Other Statutory and Equitable Relief. The defendants do not admit or deny the allegations in the Complaint.
Under the Proposed Order, the settling defendants are enjoined and prohibited from (inter alia):
- entering into swaps transactions with retail customers off a registered exchange;
- conducting activities relating to commodity options off of a registered exchange;
- acting in a capacity requiring registration without the benefit of registration;
- using the instrumentalities of interstate commerce to cheat or defraud;
- conducting activities relating to binary options;
- acting as an affiliate marketer in a capacity that involves binary options;
- offering so-called autotrading systems or services that purport to trade binary options or any commodity interest.
The Order also imposes restrictions on defendants’ assets.
The defendants are also ordered to disgorge all ill-gotten funds and to pay a civil monetary penalty, with the size of the latter to be determined by the Court.
As per the second status report filed by the Receiver assigned to the case, since the inception of the Receivership, the Receiver has frozen or recovered a total of $7,945,053.32 in funds held in accounts at multiple financial institutions and in an attorney’s trust account.
The Receiver’s preliminary analysis of the accounts reveals that there were many transfers between the identified bank accounts and frequent transfers between the defendants’ accounts and affiliate networks and marketers through which the defendants operated their businesses, attracted customers, and received their funds. Further, the forensic accountants’ consolidated account reconstructions revealed multiple transfers of substantial funds to relatives and affiliates of the defendants.
The case is captioned Commodity Futures Trading Commission v. Scharf et al (3:17-cv-00774).