CFTC Charges Californian, Floridian, and a worldwide web of companies with $16M Binary Option Fraud

Temperatures may be falling, but the Commodity Futures Trading Commission (CFTC) is Hot! Hot! Hot! The Commission has charged California resident Jason Scharf, his worldwide web of companies, and Florida-based affiliate marketers Michael Shan and Zilmil, Inc. with a $16 million binary options fraud scheme. The CFTC then goes even further, charging a number of other firms, including CIT Investments LLC, Brevspand EOOD, CIT Investments Ltd., and A&J Media Partners, Inc. with participating in the massive fraud.

Moreover, a federal district court has unsealed the CFTC’s civil complaint with the Middle District of Florida on July 10, 2017, and frozen the assets of Scharf, Shah, and Zilmil and granted the CFTC immediate access to all parties’ books and records.

Got a scorecard?

You might need one to keep track of all the parties involved in this scheme:

1. Jason B. Scharf of Valley Village, CA and the worldwide web of companies he controlled, including:

• 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.

2. Affiliate marketers Michael Shah and his company Zilmil, Inc.

All have been charged with unlawfully soliciting and accepting more than $16 million in connection with illegal binary options contracts. Add to that, the complaint also reports that Scharf also does business as Citrades.com and AutoTrading Binary.com. He’s practically everywhere!

According to the CFTC complaint, Scharf, Shah, and Zilmil acted as Futures Commission Merchants (FCM) and Commodity Trading Advisors (CTA) without being registered with the CFTC — a “no-no.”

According to James McDonald, the CFTC’s Director of Enforcement, “as alleged, the fraudulent scheme here involved false claims of outsized profits, fake testimonials, and “guaranteed returns.” And the scheme, as alleged, was massive, resulting in the misappropriation of over $16 million from more than 8,000 customers.

Posted on Scharf’s Website Citrades.com: “The Most Profitable Click You Will Ever Make.”

Binary option transactions are designed for predictive trading based on whether the price of a certain commodity rises or falls by a certain date and time. To be lawfully offered in the US, these options must be traded on a registered board of trade. That was not the case with either Scharf, Shah, nor Zilmil, none of whom are registered with the CFTC in any capacity.

From January 2014 until the present, the CFTC’s complaint alleges that Shah and Zilmil attracted potential customers through fraudulent ad campaigns and steered interested customers to binary options websites like those operated by Scharf. Scharf and his companies then wooed customers to open binary options accounts with false claims of outsized profits and “guaranteed returns,” bolstered by fake testimonials of purportedly successful customers.

Once those new accounts are funded, there is no getting one’s money back. The money is routed through numerous foreign corporations and overseas accounts before being spent on business and personal expenses, and compensating Shah and Zilmil.

Follow the money

The CFTC complaint alleges that Scharf and his companies misappropriated more than $16 million from at least 8,000 victims, most of them located in the United States. Best case scenario, the CFTC gets defrauded customers some monies back and punishes the wrong doers. But there’s no guarantee of refunds if the money is gone.

 Caveat emptor?

Of course. Every investment carries a certain amount of risk. And, yes, if it sounds too good to be true… But bad actors acting badly is another story. That’s what keeps regulators up at night. That’s why compliance matters. And that’s what keeps compliance professionals like you up at night. So, let’s talk (212-233-1155). Ask about Patrina’s comprehensive, 8-module compliance solution and compliant data capture, file storage, and records archiving specifically designed for the financial services community. We’ve got you covered