NADEX fines trader $750 and revokes exchange membership over origin of $100,000 deposit

NADEX, one of North America’s two licensed binary options exchanges, had serious concerns over the origin of funds used by a trader, hence an investigation was carried out.

NADEX, one of two licensed binary options exchanges that operate in the United States, has issued disciplinary action against one of its traders following an investigation into the deposits made to his account and how they originated.

Whilst binary options trading in many regions of the world has become a substantial taboo due to the disingenuous nature of most of the OTC operators and their dissimilarity to genuine capital markets organizations, the United States took a pragmatic approach several years ago in ensuring that all binary options trading is conducted via a central counterparty, namely any of Chicago’s listed derivatives exchanges.

One such exchange is NADEX, which is a wholly owned subsidiary of publicly listed retail FX & CFD giant IG Group.

This week, NADEX penalized exchange member Julio Salgado Velez after an investigation by the company into the source of the funds used to deposit into his trading account.

On May 15, 2018, NADEX states that Julio Salgado Velez made two deposits totaling $100,000.00 from his personal bank account into his Nadex account. In its investigation as to the source of these funds, Nadex discovered Mr Velez had received a $101,000.00 transfer on May 14, 2018 from an investment fund, Capstone Currency, LLC, owned and operated by another Nadex Member.

Immediately following this transfer of funds, Mr Velez moved $100,000.00 to his business account, then to his personal account, before finally depositing with Nadex. Nadex attempted to contact Velez on multiple occasions requesting information pertaining to the originating source of the May 15, 2018 deposits, the movement of the fundsbetween accounts, and his relationship with Capstone Currency, LLC and the other Nadex Member.

Mr Velez failed to respond to the requests for information and refused to cooperate with the investigation. Accordingly, it was determined that Velez violated Rule 5.19(g)(1) and the Member Representations, Section (d) of the Nadex Membership Agreement when he indirectly deposited funds originating from the investment fund into his Nadex account, for purposes of entering transactions on the Exchange on behalf of the investment fund and/or a third party. Additionally, Velez violated Rule 3.3(a) and Member Acknowledgements and Authorizations, Section (h) of the Nadex Membership Agreement when he failed to fully cooperate with Nadex during the course of its investigation.

As a result of the violations, Julio Salgado Velez was fined $750.00, and his Membership was revoked. Mr. Velez has also been permanently banned from trading on the Nadex markets, either directly for his own account or through an intermediately, or as an authorized trader on behalf of any other account.

In this case, it is not so much the relatively paltry figure that constitutes the fine, but it is encouraging that NADEX takes measures to check for any activity that may appear to be money laundering or illicit origins of customer funds, and it is this type of thoroughness and clarity that separates the US binary options firms from the lower echelons that have done so much to muddy the waters in other jurisdictions.

Image: FinanceFeeds CEO Andrew Saks-McLeod with NADEX CEO Tim McDermott in Chicago, Illinois

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