Receiver recovers only $29k from binary options scammers in Q1 2018

Maria Nikolova

A number of binary options entities targeted in a CFTC enforcement action have continued to invoke their Fifth Amendment right against self-incrimination and refuse to produce financial information as required by the Court.

Court-appointed Permanent Receiver Kenneth Dante Murena has just published his third report concerning the work dedicated to recovery of funds in a binary options fraud case targeting Jason B. Scharf, doing business as and, his companies CIT Investments LLC, Brevspand EOOD, CIT Investments Ltd., and A & J Media Partners, Inc., as well as their affiliate marketers Zilmil and its owner Michael Shah.

The third report, which covers the Receiver’s activities from January 1, 2018 through March 31, 2018, did not bring much of positive news. During this Reporting Period, the Receiver recovered only $29,551.98. This sum came from unused funds prepaid by Zilmil, Inc. to (an Affiliate Network) for advertising services.

Since the inception of the Receivership, the Receiver has frozen in excess of $7.9 million and recovered in excess of $6 million in funds held in accounts at multiple financial institutions and in an attorney’s trust account, pursuant to the Statutory Restraining Order and Preliminary Injunctions.

The total amount, including interest earned, in the Receiver’s fiduciary accounts for all Defendants equals $6,013,684.42 as of the end of the Reporting Period. The remaining approximately $1.9 million of the approximately $7.9 million in funds recovered remains frozen in accounts at financial institutions pending further investigation of the Receiver and developments in the Enforcement Action.

Mr Murena explains that the defendants have not provided a meaningful amount of additional financial information to him, and have continued to decline to provide written accountings of their respective assets, in the face of the Court’s orders. In particular, other than providing limited information regarding the existence or absence of certain categories of assets and producing certain bank statements and login credentials for online access to bank accounts, the defendants have not submitted financial disclosures or otherwise satisfied the production requirements in the Court’s orders, continuing to invoke their Fifth Amendment right against self-incrimination.

Regarding any contacts with victims of the scammers, the Receiver has begun, but has not completed, an investigation into the number and identity of the defendants’ customers. During the first quarter of 2018, the Receiver continued that investigation until the March 16, 2018 hearing, during which the Court indicated that the Receiver should take no further action searching for, or attempting to communicate with or obtain information or records from, the Defendants’ customers.

According to the allegations, 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.

Similarly, the Court found that there is good cause to believe that during the same time period, 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.

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

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