The U.S. Commodity Futures Trading Commission on Aug. 12 filed a civil enforcement action against five entities and four individuals for engaging in a fraudulent scheme to solicit customers throughout the United States and elsewhere for the purported purpose of trading illegal, off-exchange binary options.
According to the CFTC’s complaint, filed in the U.S. District Court for the Northern District of Illinois, the defendants perpetuated this scheme through the Yukom Enterprise, which included internet websites using fictitious trade names, including BigOption, BinaryBook, and BinaryOnline.
“Although each of the binary option brands appears to be owned by a separate entity, in actuality there was little to no distinction between the ownership and operations of BigOption, BinaryBook, and BinaryOnline,” the CFTC complaint stated. “The brands have shared office spaces; shared compliance, human resources, and accounting services. They also have common ownership and control. Further, many of the brokers and other employees and agents of the Yukom Enterprise have performed the same work for multiple Yukom Brands.”
The foreign entities mentioned in the CFTC’s complaint are:
- Yukom Communications, incorporated in Israel;
- Linkopia Mauritius, incorporated in Mauritius;
- Wirestech Limited d/b/a BigOption, incorporated in the Republic of the Marshall Islands;
- WSB Investments d/b/a BinaryBook, incorporated in Anguilla, the United Kingdom, St. Vincent and the Grenadines, and Gibraltar; and
- Zolarex d/b/a BinaryOnline, incorporated in the Republic of the Marshall Islands.
Among the individuals mentioned are Yakov Cohen, Yossi Herzog, Lee Elbaz, and Shalom Peretz. In its complaint, the CFTC seeks to hold these entities and individuals liable for, and enjoin them from, fraud and other violations.
“Our efforts to hold wrongdoers accountable do not stop at our shores,” said CFTC Director of Enforcement James McDonald. “Working with our partners here in the United States and internationally, this enforcement action represents the CFTC’s continued commitment to rooting out fraud from our markets in all forms, protecting U.S. customers, and holding participants at all levels accountable.”
The CFTC’s complaint charges that from March 2014 through the present, the defendants fraudulently solicited and accepted more than $103 million in connection with their binary options trading scheme.
The complaint further alleges the defendants:
- Falsely represented the binary options being offered are profitable, when in fact approximately 95 percent of their customers lose money;
- Misrepresented the financial expertise, physical location, and identity of the individual “brokers” who solicit and sell binary options and that the brokers have routinely and consistently used high-pressure sales techniques when soliciting customers to deposit funds with the foreign entities; and
- Engaged in various activities to conceal the true nature of their binary options enterprise, including setting up various foreign nominee entities to enter into agreements and open off-shore bank accounts through which customer funds are transferred, concealed, and ultimately misappropriated.
In its continuing litigation against the defendants, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, restitution for the benefit of customers, permanent registration and trading bans, and a permanent injunction from future violations of the Commodity Exchange Act.
Meanwhile, on Aug. 7, Elbaz was convicted by a federal jury of wire fraud and conspiracy to commit wire fraud in violation of criminal statutes based upon substantially the same underlying facts as alleged in the CFTC complaint. She is currently awaiting sentencing.