“No one will be spared” – CFTC presents new evidence in binary options fraud case

Maria Nikolova

The regulator provides new evidence uncovered during the litigation of “Millionaire Money Machine” fraudsters.

The United States Commodity Futures Trading Commission (CFTC) has reacted harshly to an attempt by marketing affiliates of binary options fraudsters to have certain restrictions against them removed and the receivership imposed on their assets – dissolved. On Monday, May 7, 2018, the CFTC filed its objection to this motion with the Florida Middle District Court.

In the document, the Commission provides new evidence uncovered during the litigation of Zilmil, Inc., and its principal Michael Shah. The defendants masterminded a wide-ranging and extremely lucrative internet scam which involved promoting and selling software systems for trading binary options. These trading systems had names like “millionaire money machine,” and the defendants told customers that they could expect “profits of $100,000 per month.”

According to the CFTC, the defendants ignore or mischaracterize the evidence in the record, and fail to address new evidence uncovered during the litigation, which militates strongly in favor of continuing the freeze and receivership.

With respect to commission payments from binary options firms, the Zilmil Defendants argue that the CFTC lacks jurisdiction over those “transactions.” According to the defendants, this is because some binary options firms may be licensed to do business in Cyprus. But the CFTC notes that it is not the “transactions” with binary options firms that the CFTC objects to. It is the Zilmil Defendants’ conduct, which violates both the anti-fraud and anti-off exchange trading provisions of the Act and Regulations.

The fact that the Zilmil Defendants conduct their fraudulent activities in the U.S. provides the CFTC with jurisdiction over their binary options-related activity, the regulator notes.

The fact that some binary options firms may be permitted to operate outside of the U.S. does not excuse the Zilmil Defendants’ conduct. Moreover, in CFTC v. Vision Financial Partners, LLC, the court rejected the same argument that the Zilmil Defendants make here, holding that the CFTC had jurisdiction to bring claims against a U.S. defendant who solicited customers for investments in offshore binary options firms like Banc de Binary (whom Zilmil does business with). This case targeted Vision Financial Partners that did business with Banc de Binary, Binex and SpotOption.

Regarding the new evidence, the CFTC notes that in recent deposition testimony, two witnesses, Mike Wright and Bill Berry, testified that Shah instructed them to destroy binary options-related documents and communications. Shah’s instructed them to do this after Shah received subpoenas from the CFTC in January and February 2017.

For instance, Mr Wright had to create video content. The representations in the scripts and videos, which typically featured testimonials from actors touting the profitability of the trading systems, were entirely fabricated. Mr. Wright did “dozens” of binary options projects for Shah. In Spring or Summer of 2016, however, Wright testified that Shah called him and instructed him to destroy all projects and communications relating to binary options.

During discovery, the CFTC served subpoenas on Grayson Brookshire and Blake Barrett, who worked as “mailers,” sending mass emails promoting the Zilmil Defendants’ binary options trading systems. Brookshire and Barrett produced a series of Skype chat logs in which Mr. Shah talks about “scamming” customers with his binary options autotrading systems:

“I want to gratefully ask you for support with my new scam. Millionaire Money Machine goes live at exactly 3AM EST Monday morning, as that’s when all the brokers start their scammy days. I have a FIFTEEN broker rotation with some backups, so every one of your leads will get the utmost scam, no one will be spared

In another series of chats, Shah says:

Mike S: And 100% of the stuff here’s bs.. if there was a magic system, then you wouldn’t spend 10 hrs daily chatting here and would invest all ur money there.

Mike S: Proof is bs, systems bs everytthing is bs..”

This additional evidence of the Zilmil Defendants’ fraudulent scheme further justifies the asset freeze previously entered by the Court, the CFTC argues. The regulator requests that the Zilmil Defendants’ motion to modify the asset freeze be denied, and that the asset freeze, receivership, and preliminary injunction continue upon the same terms previously set.

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