Posted: Tuesday, September 8, 2020. 8:23 pm CST.
By Aaron Humes: Following its filing of civil enforcement action in court in the Western District of Texas against six individuals and four companies for a multi-million-dollar trading scheme, the United States Commodity Futures Trading Commission (CFTC) thanked a list of international regulatory partners for their assistance.
This included the International Financial Services Commission of Belize (IFSC), which provided us with a statement saying, “The IFSC is pleased to have been a part of this international regulatory cooperation effort to root out financial crime and wrongdoing wherever it occurs.”
Between May of 2013 and April of 2018, a trio of Canadian brothers, David Cartu, Jonathan Cartu, and Joshua Cartu, assisted by American Ryan Masten of Texas and two Canadian-Israeli brothers Leeav and Nati Peretz, operated a worldwide scheme of trading illegal, off-exchange binary option transactions on currency pairs, oil, and other commodities for a total of US$165 million.
A binary option has been described as a form of gambling, in which the bet is that a certain price of commodity will reach a certain point; when it does you can collect significant sums but if it doesn’t, you get back nothing, or in certain forms of the scheme, a minimal payment.
In the case of this fraud, the individuals and companies involved were not registered with the CFTC; caused their brokers soliciting American companies to falsely represent their financial expertise, compensation structure, physical location, and identity. These brokers also falsely claimed that the offered binary option transactions were profitable, when the majority of customers lost money, and the group promised “quick” returns of “between 60-85%” while manipulating some trades to force customer losses and make quick profits for themselves.
“The scope and breadth of the fraudulent activity alleged in this case is only matched by that of the international and domestic cooperation organized to prosecute it,” said Division of Enforcement Director James McDonald in the CFTC’s statement. “The CFTC is committed to leveraging not only our resources, but also our extensive relationships with domestic and foreign partners, to root out misconduct in our derivatives markets.”
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 as charged.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost, because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers to ensure wrongdoers are held accountable.
Among its partners, the CFTC received assistance from Canada’s Ontario Securities Commission, which is pursuing the Cartu brothers separately for violations of securities law involving over 700 Ontarian investors and over $1.4 million Canadian dollars; the U.S. Securities and Exchange Commission (SEC); and partners in Australia, Cyprus, Germany, the Republic of Ireland, Israel, Malta, Switzerland, and the United Kingdom.
Neither the IFSC nor CFTC spoke to the extent of any impact of the fraudulent scheme in Belize.
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