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The CFTC and Federal Court are HOT!

Value Options Ltd. and Global Trader 365 banned and fined a cool $4.5 million-plus

 Was no one watching when Vault Options, Ltd. and Global Trader 365 engaged in unlawful off-exchange binary options trading, fraud, and registration violations?

Apparently not.

Late last month, Judge John Z. Lee of the U.S. District Court for the Northern District of Illinois entered an Order of Final Judgment by Default requiring Defendants Vault Options, Ltd. and Global Trader 365, two Israeli web-based binary options firms, to jointly and severally pay a $3 million civil monetary penalty and $1,587,731 in restitution to their defrauded customers. The Court’s Order also imposes permanent injunctions and permanent trading bans.

Hit in the pocketbook and

knocked out of business

Last month’s Order stemmed from a CFTC Complaint filed February 2, 2016. The CFTC found that both firms violated the Commodity Exchange Act’s ban on off-exchange options trading and off-exchange swaps trading by offering to enter into and entering into binary commodity option contracts with retail U.S. customers. Worse yet, the companies defrauded customers by making false representations in their solicitations and, even worse, misappropriating their funds.

Neither firm was registered as a designated contract market, exempt board of trade or bona fide foreign board of trade. So, the binary options transactions they offered constituted unlawful off-exchange options and unlawful swaps. Unlawful or not, the firms solicited and accepted at least $1.6 million from U.S. customers in 22 states to enter into unlawful off-exchange binary options contracts.

Lies + damn lies = fraud

Both firms further defrauded their customers by claiming each could make large profits, and by falsely representing that their invested funds were insured against loss. So, many customers quickly lost nearly everything invested. And when those unhappy campers called to find out where their money was…radio silence – no response. The money was gone. And, cautions the CFTC, despite the fines and restitution, victims may never recover any money because the wrongdoers may not have sufficient funds or assets.

So, who’s watching your firm?

Stuff happens. But when it happens to you, it can lead to bad things. Costly bad things. Even for web-based operations and for foreign-owned entities. Because in this instance, the CFTC’s Enforcement Division also worked hand-in-glove with the Israeli Securities Authority, the Cyprus Securities and Exchange Commission, and the Ontario Securities Commission.

Pay attention to the rule$

If you are charged with compliance, you know you’re facing increased oversight. Pay attention. At least have the right policies and procedures in place supported by systems to ensure they are read, followed, and reviewed. It’s a given that regulatory compliance requirements are getting more all-consuming and complying can often times feel like an undertaking without end. If your compliance function is under pressure to do more with less, what are the options?

Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliance recordkeeping specifically designed for the financial services community.

Let’s talk.