US court-appointed receiver confirms $7.4 million frozen in binary options fraud case

Maria Nikolova

Kenneth Dante Murena, who has been appointed Permanent Receiver in a binary options fraud case in the US, is having hard time obtaining information from the defendants in the case.

Binary options firms, targeted by the United States Commodity Futures Trading Commission (CFTC) in a fraud case, have invoked their Fifth Amendment right against self-incrimination and have been reluctant to provide the court-appointed Receiver in the case with the required information.

This becomes clear from the initial report by Kenneth Dante Murena, named Permanent Receiver in the enforcement action, which 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 case

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 money uncovered

The Receiver has received confirmation that $7,381,366.29 in funds held in accounts at multiple financial institutions have been frozen pursuant to the Statutory Restraining Order and Preliminary Injunctions.

Of those funds, $7,381,148.82 were in accounts of the Zilmil Defendants, and $217.46 were in accounts of the Citrades Defendants. The Receiver has effected the transfer of some $3.45 million of those funds to the fiduciary accounts he opened for the Receivership Estate.

The Receiver has obtained account statements from 21 different financial institutions at which the Defendants maintained more than 151 accounts and has reviewed and performed a preliminary analysis of most of those statements for purposes of determining whether a more extensive forensic analysis is necessary.

  • The Bulgarian peculiarities

The Receiver has identified four bank accounts held in the name of Defendants CIT Investments, Ltd. or Brevspand EEOD in the Bulgarian bank Investbank. The Receiver and his professionals have sent a letter and the Statutory Restraining Order, demanding the turnover of those accounts, the transfer of the account balances to the Receiver’s fiduciary account, and the production of account records. The Receiver has spoken to Investbank representatives, who confirmed that the accounts have been frozen but would not disclose the account balances or comply with the Receiver’s other requests.

  • Cyprus, Antigua…

The Receiver also has learned of the existence of bank accounts associated with the binary options firms in question or their affiliates located in the Czech Republic, Cyprus, Antigua, and Toronto, Canada, and is working to obtain account records and determine the account balances.

  • The Fifth Amendment

The Statutory Restraining Order requires the Defendants, within five business days following the service of the Order, to provide the Receiver with a detailed accounting of all their funds, assets, and documents, to transfer all assets to the control of the Receiver, and to provide the Receiver with access to records of all their accounts or assets. To date, however, the Defendants have provided limited financial information to Mr Murena, but have not provided him with an accounting of their assets.

Indeed, none of the Defendants have submitted their financial disclosures, or provided the Receiver with financial records other than certain bank statements, and they have not satisfied the production requirement in the Court’s orders, invoking their Fifth Amendment right against self-incrimination.

  • Those affected

Based on his discussions with the CFTC, the Receiver estimates that the companies in this case may have had tens of thousands of investors and customers. Once the Receiver has a list of those affected, he will provide each customer or investor with notice of and information regarding the Receivership and the CFTC enforcement action and how they may stay informed of the status of the case, how their rights may be affected, and how they may participate in this Receivership and eventually receive distributions based on any losses they may have sustained as a result of the Defendants’ actions.

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

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