Binary Options Firm Fined $22 Million by the CFTC

Binary Options Firm Fined $22 Million by the CFTC

Yesterday, the Middle District of Florida entered a Consent Order for Permanent Injunction, Civil Monetary Penalty, and Other Equitable Relief against Dr. Michael Shahand and Zilmil, Inc., who allegedly engaged in a large-scale internet fraud scheme from at least June 2013 through July 10, 2017, involving off-exchange binary options. A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise above or fall below a specified amount.

According to the Order, the defendants acted as independent marketers, referred to as “affiliate marketers,” who attracted and funneled customers to unregistered binary options trading websites, including by offering so-called binary options autotrading systems with names like “Millionaire Money Machine.”  According to the Order, the systems placed trades until the customers’ accounts were depleted.

On their face, binary options are not fraudulent. Many binary options products are listed on exchanges and have regulatory oversight. But like Forex, many internet-based platforms have surged into the market, and with that surge, the opportunity for fraudulent promotional schemes, overstatement of returns, and the failure to pay out for the wins have increased. Furthermore, some actors are using manipulative software to rig the system, so “winning” bids end up losing.

Any registered or non-registered company that receives a CFTC  investigative demand regarding binary options should consult competent counsel immediately to discuss the investigative process.

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