Continuing its work against investment schemes targeting retail traders in the US and around the world, US regulator CFTC has charged California resident Jason B. Scharf, his worldwide web of companies, and Florida-based affiliate marketers Michael Shah and Zilmil, Inc. with running a $16 million Binary Options fraud scheme.
The CFTC has announced that a federal district court has unsealed a civil CFTC Complaint filed with the Middle District of Florida on July 10, 2017, charging Jason B. Scharf of Valley Village, California, a 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, together with affiliate marketers Michael Shah and his company Zilmil, Inc., both of Jacksonville, Florida, with unlawfully soliciting and accepting more than $16 million in connection with illegal binary options contracts.
Scharf does business as Citrades.com and AutoTradingBinary.com, according to the complaint. We understand that the companies were actually operated from Tel Aviv, Israel and Sofia, Bulgaria. The websites of both companies are now down, with the autotradingbinary.com site now stating: Maintenance mode is on – ATB is going through some upgrades and will be online soon…
In addition, the complaint charges Scharf, Shah, and Zilmil with acting as Futures Commission Merchants (FCM) and Commodity Trading Advisors (CTA) without being registered with the CFTC, as required.
On July 12, 2017, U.S. District Court Judge Brian J. Davis entered a Statutory Restraining Order freezing the assets of Scharf, Shah, and Zilmil, prohibiting them from destroying their books and records, and granting the CFTC immediate access to those records. The Court has scheduled a hearing for July 26, 2017 to determine whether to enter an order for preliminary injunction against the Defendants and also to determine, among other things, whether the court should continue the freeze on Defendants’ assets.
Scharf’s website Citrades.com claimed: “The Most Profitable Click You Will Ever Make.”
James McDonald, the CFTC’s Director of Enforcement, stated:
The CFTC continues to be committed to rooting out and prosecuting binary options fraud in our markets. 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. This action should send a message to would-be fraudsters that the sort of conduct alleged here will not be tolerated. We thank our international law enforcement partners for their assistance in this case.
Binary options are transactions that allow customers to make predictive trades as to whether the price of a certain commodity will rise or fall by a certain date and time. As alleged in the CFTC’s complaint, binary options must be traded on a registered board of trade in order to be lawfully offered in the United States. The complaint alleges that neither Scharf, Shah, nor Zilmil executes transactions on a registered board of trade and none has ever been registered with the CFTC in any capacity.
The complaint alleges that since at least January 2014 and continuing to the present, Shah and Zilmil have attracted potential customers through fraudulent ad campaigns to purchase binary options trading systems, and steer interested customers to binary options websites like those operated by Scharf. According to the complaint, Scharf and his companies then fraudulently solicit customers to open binary options accounts with false claims of outsized profits and “guaranteed returns” trading binary options, bolstered by fake testimonials of purportedly successful customers.
The complaint further alleges that once customers fund binary options accounts, they do not get their money back. Instead, the complaint alleges that the funds are routed through numerous foreign corporations and overseas accounts before being spent on business and personal expenses, and compensating Shah and Zilmil.
Misappropriation of Customer Funds
According to the complaint, the Defendants’ binary options scam has been extremely lucrative. As alleged, Scharf and his companies have misappropriated more than $16 million from at least 8,000 victims, most of them located in the United States.
In its continuing litigation, the CFTC seeks restitution to defrauded customer, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and permanent injunctions from future violations of the Commodity Exchange Act and CFTC Regulations, as charged.
The CFTC cautions that Orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
The CFTC appreciates the assistance of the Anguilla Financial Services Commission and the Financial Supervision Commission of the Republic of Bulgaria.
The CFTC also thanks the IRS – Criminal Investigation, Cincinnati Field Office, and the FBI Cleveland Division, as well as the Jacksonville Sheriff’s Office for their substantial assistance on this matter.