Receiver’s Report indicates more than $9.2m frozen in binary options fraud case

Kenneth Dante Murena, the court-appointed Permanent Receiver in an enforcement action brought by the Commodity Futures Trading Commission (CFTC) against a number of binary options brokers and their marketing affiliates, has just submitted his fifth status report. The report sets forth his activities for the time period of July 1, 2018 through September 30, 2018.

The enforcement action targets Jason B. Scharf, doing business as Citrades.com and AutoTradingBinary.com, 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.

As of the end of this Reporting Period, including funds frozen in India, the Receiver has frozen and/or recovered in excess of $9.2 million in accounts of the Zilmil Defendants, of which more than $5.9 million was transferred to the Receiver’s fiduciary accounts and more than $3.3 million remains frozen in accounts at various institutions pending further investigation by the Receiver and developments in the enforcement action.

The Receiver says he is seeking to have some of those frozen funds transferred to the Estate and will allow other funds to remain in the frozen accounts because they are investments, potentially exempt assets, and/or jointly owned with non-defendants and the sources of the funds have not yet been confirmed, or until the circumstances of the case change.

Let’s recall that, during a prior reporting period, the Receiver identified funds of Defendant Brevspand EOOD in the amount of $24,796.31 held by Skrill, an affiliate of Paysafe Group Limited. The Receiver worked with counsel for Skrill and Paysafe to reach an agreement to have those funds transferred to the Receiver’s fiduciary account. On August 30, 2018, the Florida Middle District Court approved a settlement agreement concerning those funds. And, on September 18, 2018, the estate received the funds totaling $24,796.31.

In addition, the Receiver had begun, but has not completed, an investigation into the identity of the the defendants’ customers and the amounts they transferred to the defendants. If and when the Receiver is directed by the Court to resume his investigation of the defendants’ customers, the Receiver will complete the investigation and seek to provide each customer with notice of and information regarding the Receivership.

The bulk of the funds recovered come from the binary options marketers – Michael Shah and his company Zilmil. Let’s recall that, according to the CFTC Complaint, between July 2012 and the present, Shah and Zilmil made more than $18.6 million in proceeds from their fraudulent scheme.

The defendants are alleged to have induced people to deposit money with illegal binary options trading websites that claimed to offer customers the ability to trade binary options online. The defendants acted as marketers for the following binary options websites: LBinary, Global Trader 365, Vault Options, TraderXP, Trade Rush, Banc de Binary, Citrades, OptionMint, OptionRally, RBOptions, Bloombex Options, Redwood Options, BeeOptions, Amber Options, OptionsXO, and SpotFN. None of these websites or their operators are or ever have been registered to offer binary options contracts to the public.

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