CFTC slams response by defendant in binary options fraud case

The United States Commodity Futures Trading Commission (CFTC) is persistent about its actions against binary options fraudsters, as demonstrated by the latest filings in the case targeting Aaron B. Butler and his company Negus Capital Incorporated (NCI).

Documents submitted by the regulator at the Alabama Northern District Court move the Court for an order striking Butler’s answer, including all affirmative defenses, filed on or about January 14, 2020. According to the CFTC, Butler’s answer, which, in essence constitutes a general denial of all allegations, is deficient and improper under Fed. R. Civ. P. 8(b) and the affirmative defenses contained in the answer are patently frivolous and insufficient as a matter of law.

Let’s recall that, on November 4, 2019, the CFTC filed its Complaint for Injunctive Relief, Restitution, Civil Monetary Penalties and Other Equitable Relief under the Commodity Exchange Act that contained 79 paragraphs of allegations against Butler and Negus Capital. The defendants are charged with fraudulent solicitation, misappropriation, and registration violations in connection with binary options trading.

The CFTC’s complaint alleges that from March 16, 2017, through February 21, 2018, Butler and NCI unlawfully solicited and accepted at least $300,000 from more than 65 members of the public to trade binary options contracts on the North American Derivatives Exchange (Nadex), defrauded those customers, and operated as an unregistered commodity pool operator (CPO) and an unregistered commodity trading advisor (CTA).

Thereafter, on or about January 14, 2020, Butler, as a pro se litigant, filed his answer, containing the following statements by Butler to all 79 paragraphs of allegations:

• That he admits “none” of the allegations in the paragraphs of the Complaint;
• That he denies “none” of the allegations in the paragraphs of the Complaint;
• That he does not lack knowledge or information sufficient to form a belief about the truth as to any of the allegations in the paragraphs of the Complaint; and, yet,
• That as to “all” of the allegations in the paragraphs of the Complaint, he “cannot adequately recall committing the allegations contained []in the complaint, [and] therefore [he] can neither confirm nor deny these allegations.”

The CFTC argues that Butler’s answer does not comply with Fed. R. Civ. P. 8(b), and, as such, should be struck. Rule 8(b) specifically requires that a defendant ‘fairly respond to the substance of an allegation’ in three ways: ‘admit or deny the allegations asserted against it by an opposing party’ or state that it lacks knowledge or information sufficient to form a belief about the truth of an allegation.

Instead, Butler simply states that as to “all” of the allegations in the paragraphs of the Complaint, he “cannot adequately recall committing the allegations” and, therefore, he “can neither confirm nor deny these allegations.” That is an insufficient response to the Complaint under Rule 8 and, as such, the answer should be struck for that reason alone, the CFTC says.

In its continuing litigation against Butler and NCI, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction from future violations of the Commodity Exchange Act and CFTC regulations.