Florida Court grants CFTC motion for order against “Millionaire Money Machine” binary options fraudsters

Judge Timothy J Corrigan of the Florida Middle District Court has agreed to issue an order against binary options firms touting their business as “Millionaire Money Machine”. On Monday, March 19, 2018, the Judge agreed to issue an Order of Permanent Injunction and Other Statutory and Equitable Relief against Jason B. Scharf (doing business as Citrades.com and AutoTradingBinary.com) and A&J Media Partners, Inc. The Order was proposed by the United States Commodity Futures Trading Commission (CFTC) earlier in March.

The CFTC 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 CFTC Complaint details the fraudulent practices of the above-mentioned binary options firms, including promises of artificially high returns, bonuses and luxurious life, followed by an end of any communication once money was deposited.

According to the CFTC proposal, 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.

Also on Monday, the Court denied without prejudice a motion by Zilmil and Michael Shah – the marketing affiliates of the binary options firms in question. Zilmil and Shah were seeking to compel the CFTC to provide more detailed answers to their interrogatories. The CFTC has objected to these requests.

The CFTC has noted that every interrogatory propounded by the Zilmil Defendants demands that the regulator provide narrative responses describing or identifying “all facts” relating to the CFTC’s claims. According to the CFTC, such all-encompassing interrogatories are prohibited by the Court’s Middle District Discovery handbook and applicable case law as “overbroad and oppressive.” The handbook requires that interrogatories be “reasonably particularized,” and that interrogatories “designed to force an exhaustive or oppressive catalogue of information” are generally improper.

The Zilmil Defendants may not require the CFTC to provide an “exhaustive catalogue” of facts which form the bases for the CFTC’s claims. Indeed, it would be impracticable if not impossible to do so given the expansive scope of the Zilmil Defendants’ misconduct, the CFTC argues.

On Monday, the Court offered to the Zilmil defendants to send the CFTC more targeted and focused interrogatories, and the CFTC was directed to provide more fulsome responses.

The case is captioned Commodity Futures Trading Commission v. Scharf et al (3:17-cv-00774).