Judge recommends $5.7m civil monetary penalty for binary options fraudster

Several months after the United States Commodity Futures Trading Commission (CFTC) secured entry of default against binary options fraudster Peter Szatmari, the Court has issued recommendations as to the penalties in this case.

Earlier this week, Magistrate Judge Kenneth J Mansfield of the Hawaii District Court signed a document of findings and recommendations.

According to the CFTC complaint, Szatmari lured prospective customers of binary options firms by disseminating fraudulent marketing materials in six marketing “campaigns.” These solicitations instructed unsuspecting investors to open and fund binary options accounts with “recommended” brokers to get free access to automated trading software that purported to generate astronomical profits with no risk of loss. According to the filings, these marketing materials included numerous false or misleading statements.

Szatmari also failed to disclose that he received a fee from the binary options brokers he recommended every time a new account was opened and funded as a result of his solicitations. Further, he failed to disclose that this fee arrangement was the sole basis for recommending brokers. Szatmari’s fraudulent solicitations were disseminated to and/or viewed by millions of prospective customers, with approximately 25,000 customers opening binary options trading accounts and funding those accounts, usually with an initial deposit of $250 or more.

In the document issued earlier this week, the Court finds that the allegations in the CFTC’s complaint are sufficiently pled. Accordingly, the sufficiency of the Complaint weighs in favor of default judgment against Szatmari.

In this case, Szatmari and his parther defrauded approximately 25,000 victims and obtained over $3,799,633.00 in fees paid to them for the trading accounts that were opened. The Judge notes that the defendant’s conduct was not an isolated incident, but a continuing effort to use misleading solicitations to promote automated trading software from 2014 until December 2016. Additionally, there is no evidence before the Court that the defendant showed any remorse for his actions or the victim’s losses.

Accordingly, the Court finds that there is a reasonable likelihood that Szatmari would engage in the same acts and practices alleged in the Complaint. Therefore, the Court finds and recommends that the defendant be permanently enjoined form committing any future violations of the Act or of the Commission’s regulations.

The Court recommends that the defendant shall be ordered to pay $6,258,250.00 in restitution with an off-set for any amount paid by the partner pursuant to the settlement.

Due to Szatmai and his partner’s fraudulent conduct, they made $3,799,673.00 in gross profits. The partner was ordered to disgorge the amount of $1,899,837.00 pursuant to the settlement agreement with the CFTC. Therefore, Szatmari should be ordered to disgorge in the amount of $1,899,836.00.

In addition, the CFTC requests a civil monetary penalty in the amount of $5,699,508.00. This amount represents three times the defendant’s gain of $1,899,836.00.

The Judge refers to “the egregiousness of Defendant’s systemic and pervasive scheme to mislead and profit off of participants from at least 2014 to December 2016, the intentional nature of the conduct, and Defendant’s failure to defend this action or accept any responsibility for his misconduct”,to recommend that a civil monetary penalty in the amount of $5,699,508.00 is warranted in this case.