A firm that allegedly marketed unregistered binary options trading schemes to investors has been sanctioned by a U.S. court, derivatives regulators are reporting.
The U.S. Commodity Futures Trading Commission (CFTC) announced that a U.S. district court judge ordered $22.9 million (all figures in U.S. dollars) in monetary sanctions against Zilmil Inc. and Dr. Michael Shah in connection with “a large-scale internet fraud” involving off-exchange binary options.
The CFTC said the court’s order found that the defendants marketed unregistered binary options trading websites, including automated trading systems that placed trades until customers’ accounts were depleted.
The judgment included a restitution award of $9.3 million and a $1 million penalty against Dr. Shah, and a restitution award of $8.55 million and a penalty of $4 million against Zilmil.
The regulator alleged that they generated more than $17.8 million from the sale of their auto-trading systems and commissions from the binary options websites.
“Unfortunately, we have seen fraudsters in our markets seek to take advantage of the potential anonymity of the internet or various social media platforms to perpetrate their schemes. This includes so-called ‘affiliate marketers,’ who market these fraudulent schemes to unwitting customers, often over email, social media, or some other internet platform,” James McDonald, director of the CFTC’s enforcement division, said in a statement.
“This case should reaffirm the commission’s commitment to aggressively prosecuting fraud, and it should serve as a warning to would-be fraudsters of all types — including affiliate marketers — that they cannot hide behind the potential anonymity of the internet to evade detection and prosecution,” he added.