Receiver confirms recovery of additional $2.5m in binary options fraud case - FinanceFeeds

Receiver confirms recovery of additional $2.5m in binary options fraud case

From September 26, 2017 to December 31, 2017, the Receiver recovered an additional $2.52 million from accounts in the name of binary options “affiliate marketers” Zilimil.

More than four months have passed since Kenneth Dante Murena, named Permanent Receiver in an enforcement action brought by the Commodity Futures Trading Commission (CFTC) against a number of binary options firms and their principals filed his initial status report into the case. On Friday, February 9, 2018, the Receiver filed his second status report, which covers the period from September 26, 2017 through December 31, 2017.

The case targets Jason B. Scharf, doing business as and, his companies CIT Investments LLC, a Nevada limited liability corporation; Brevspand EOOD, a Bulgarian business entity; CIT Investments Ltd., a Marshall Islands business entity; CIT Investments Ltd., an Anguillan business entity; and A & J Media Partners, Inc., a California corporation. The case also names their affiliate marketers Zilmil and its owner Michael Shah among the defendants.

The CFTC alleges that, from June 2013 through the present, the Citrades Defendants operated a massive scam in which they fraudulently solicited customers to enter into illegal, off-exchange investments in binary options. The firms received at least $16 million in customer funds. The Zilmil Defendants acted as third-party ‘affiliate marketers’ who drove internet traffic to the Citrades Defendants by fraudulently soliciting customers to sign up for or purchase binary options autotrading systems. They instructed the customers to send money to the Citrades Defendants and made gross revenues of more than $4 million from sales of its autotrading systems and another $500,000 in commissions from the Citrades Defendants.

As per the Second Status Report, during the September-December period, the Receiver recovered an additional $2,521,103.61 from accounts in the name of the Zilimil Defendants, bringing the total amount, including interest earned, in the Receiver’s fiduciary accounts to $5,975,242.38 as of the end of the Reporting Period.

Specifically, since the inception of the Receivership, the Receiver has frozen or recovered a total of $7,945,053.32 in funds held in accounts at multiple financial institutions and in an attorney’s trust account. The remaining approximately $1,900,000 of the $7,945,053.32 total amount frozen or recovered remains frozen in accounts at financial institutions pending further investigation of the Receiver and developments in the enforcement action.

In the period covered by the second status report, the defendants have provided additional financial information to the Receiver but have still declined to provide written accountings of their respective assets, as required by the Court’s orders. In particular, the defendants have not submitted financial disclosures or otherwise satisfied the production requirements in the Court’s orders, invoking their Fifth Amendment right against self- incrimination.

The Receiver’s preliminary analysis of the accounts reveals that there were many transfers between the identified bank accounts and frequent transfers between the defendants’ accounts and affiliate networks and marketers through which the defendants operated their businesses, attracted customers, and received their funds. Further, the forensic accountants’ consolidated account reconstructions revealed multiple transfers of substantial funds to relatives and affiliates of the defendants.

Let’s recall that the CFTC has clashed with the Zilmil defendants over evidence. The CFTC has objected to the requests for admissions and interrogatories made by Zilmil. For instance, the regulator has noted that identifying binary options trades is particularly challenging. The CFTC says that it has not identified trades placed by autotrading systems sold or promoted by Zilmil. This is because such trades are placed on illegal, unregistered internet-based exchanges.

The case, captioned Commodity Futures Trading Commission v. Scharf et al (3:17-cv-00774), continues at the Florida Middle District Court.

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