CFTC seeks preliminary injunction against binary options fraudsters who ran $4.8m scheme

Maria Nikolova

The CFTC has asked the Illinois Northern District Court to issue a preliminary injunction against Arie Bos, Berkley Capital Management, LLC (BCM), BBOT 1, LP and Berkley II, LP.

Less than a month after the United States Commodity Futures Trading Commission (CFTC) launched an action at the Illinois Northern District Court targeting a raft of entities responsible for a $4.8 million fraudulent binary options scheme, the regulator is now seeking a preliminary injunction against Arie Bos, Berkley Capital Management, LLC (BCM), BBOT 1, LP and Berkley II, LP.

The relevant motion was submitted at the Court on Tuesday, May 28, 2019.

The CFTC notes that none of the defendants appeared at the hearing on May 22, 2019, with the exception of Caniff with whom the CFTC has entered into a Consent Preliminary Injunction. According to the regulator, a preliminary injunction is proper in this case to preserve the status quo, prevent the withdrawal, transfer, removal, dissipation, or disposal of assets; prevent the destruction, alteration, or disposal of books and records and other documents; protect members of the public from loss and damage; and enable the CFTC to fulfill its statutory duties.

If the Court grants the Commission’s request, the Order shall remain in full force and effect until further order of the Court, and the Court shall retain jurisdiction over this action to ensure compliance with this Order and for all other purposes related to this action. The Order would supersede the Statutory Restraining Order entered on May 1, 2019 as it relates to defendants Bos, BCM, BBOT and Berkley II.

According to the CFTC Complaint, from at least January 2016 and continuing through the present, William Thomas Caniff, Arie Bos, Berkley Capital Management, LLC (BCM), BBOT 1, LP and Berkley II, LP, engaged in a scheme whereby they fraudulently solicited and accepted at least $4.8 million from at least 62 commodity pool participants for the purpose of trading binary options on or subject to the rules of a designated contract market in pool accounts to be managed by BCM.

The CFTC alleges that all of the defendants committed options fraud, whereas Caniff is said to also have made a false statement to a registered entity.

In January 2016, Caniff and Bos formed BCM and began to offer individual participants the opportunity to trade binary options with pools of other participants, first through the BBOT pool and later through the Berkley II pool. Caniff used a small portion of participants’ funds to trade binary options through an account he set up at the binary options trading firm, the North American Derivatives Exchange, Inc. (NADEX), which is a designated contract market headquartered in Chicago, Illinois.

Caniff sent Bos fabricated statements reflecting incredible results of his trading for these pools. In turn, Bos ignored numerous red flags and recklessly accepted Caniff’s reports of profitable trading without verifying the results in any way and used them to both solicit participants with claims of past profitable trading and generate false statements that he sent to participants showing grossly-inflated, non-existent, profits for their accounts.

The CFTC Complaint alleges that Caniff misappropriated a substantial portion of the participants’ funds, paying Bos and himself between $1.1 million to $1.2 million each as “fees based on non-existent profits. Caniff also misappropriated funds to pay some participants a total of $2.3 million in a manner akin to a Ponzi scheme. Overall, the defrauded participants have experienced a shortfall of approximately $2.5 million.

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