CFTC opposes binary options marketers’ efforts to strike evidence in fraud case

About a month after the United States Commodity Futures Trading Commission (CFTC) asked the Court to impose a civil monetary penalty of $56 million on marketing affiliates of binary options brokers, the US regulator has sought to rebuff the defendants’ attempt to have important evidence not accepted in the case.

Let’s recall that, in July this year, the CFTC filed a Motion for Summary Judgement against Michael Shah and his company Zilmil, Inc. They are accused of perpetrating an internet scam involving binary options. Between July 2012 and the present, Shah and Zilmil are alleged to have made more than $18.6 million in proceeds from their fraudulent scam.

Now, the CFTC has to stand up for the evidence it has obtained in this case. As per the latest Court filings, seen by FinanceFeeds, the Commission objects to defendants’ efforts to have certain evidence removed from the case.

When filing its Motion for Summary Judgement, the CFTC appended the declarations of Antonio Giacca, Jan Silver, and Valerie Tate. Mr. Giacca was a mailer for Michael Shah, and he worked with Shah to send false representations in emails to potential customers about the Zilmil binary options autotrading systems. Mr. Giacca also destroyed documents relating to the Zilmil autotrading systems at Shah’s direction.

Mr. Silver and Ms. Tate are victims of the binary options fraud. They purchased or signed up for binary options autotrading systems on the basis of the defendants’ misrepresentations. In particular, the marketers solicited Ms. Silver and Ms. Tate to deposit money with unregistered binary options websites, which misappropriated their money.

Shah and Zilmil argue that the declarations of Antonio Giacca, Jan Silver, and Valerie Tate should be stricken.

The defendants argue that the victims’ declarations should be stricken because Mr. Silver’s and Ms. Tate’s names were “buried” among other names and documents in the case. The CFTC argues that, with respect to Ms. Tate, the defendants are correct that her name was one in a long list of customer witnesses. This does not, however, justify striking her declaration. Zilmil and Shah defrauded thousands of people.

The US regulator also stresses that when the CFTC has asked the defendants to identify customers, however, they have refused to do so. Instead, they invoked their Fifth Amendment rights against self-incrimination.

According to the CFTC, the defendants cannot refuse to disclose the identities of potential witnesses, only to complain when they are eventually discovered. Striking Ms. Tate’s or Mr. Silver’s declaration would allow the alleged fraudsters to benefit from the extraordinary scale of their fraud, and from their invocation of the Fifth Amendment, which has significantly impeded the CFTC’s ability to timely locate customer witnesses, the Commission warns.

Moreover, the CFTC argues that the defendants incorrectly challenge the declarations of Mr. Giacca and Mr. Silver on the grounds that they are not based on personal knowledge and constitute inadmissible hearsay.

Nothing in this case suggests that Mr. Giacca’s or Mr. Silver’s declarations are not based on personal knowledge or that they are not competent to testify, the CFTC says. Mr. Giacca states that he was an affiliate marketer and worked with Shah for four years, between 2013 and 2017. As such, according to the regulator, he is fully capable of testifying from his own personal observations about the work in which he and the defendants engaged during that period, and it is absurd to suggest that he lacks personal knowledge of the activities of his long-time business partner.

Similarly, Mr. Silver states that he purchased Binary Genetic, an autotrading system that the defendants promoted on Clickbank. Indeed, he provides corroborating evidence of this transaction. As a purchaser of Binary Genetic, Mr. Silver is certainly competent to testify as to his understanding of what he purchased, why he purchased the autotrading system, how he purchased the system, and his experience after purchasing the system.

Furthermore, the CFTC notes that the defendants’ objections that certain statements that Shah made to Mr. Giacca constitute inadmissible hearsay are without merit. Specifically, the defendants object to Mr. Giacca’s statements that Shah told him that customers could not get their money back from binary options website operators, and that binary options website operators always make money. These statements by Mr. Giacca are not inadmissible hearsay, the CFTC argues. That is because they demonstrate Shah’s knowledge of the fraud perpetrated by the binary options website operators.

According to the US regulator, the defendants’ arguments are without legal or factual support and should be rejected by the Court.

The case, captioned Commodity Futures Trading Commission v. Scharf et al (3:17-cv-00774), continues at the Florida Middle District Court.