Illegal binary options trading nets Intrade and TEN a $3 million fine

SFC fines

The U.S. Commodity Futures Trading Commission (CFTC) has announced that on July 5, 2018, Senior Judge Royce C. Lamberth of the U.S. District Court for the District of Columbia issued an Opinion and Order against defendants Intrade The Prediction Market Limited and Trade Exchange Network Limited (TEN), Irish companies based in Dublin, Ireland, requiring them to pay, jointly and severally, a $3 million civil monetary penalty for violations of the Commodity Exchange Act (CEA) and CFTC Regulations.

In ordering Intrade and TEN to pay a multi-million dollar civil monetary penalty, Judge Lamberth found, among other things, that Intrade’s and TEN’s repeated:

violations severely compromised the regulatory purpose of the CEA and [were] serious” and, therefore, those “violations of the CEA and Commission Regulations, coupled with their brazen defiance of the 2005 Commission Order, warrant[ed] a CMP of $3 million.

The Opinion and Order stem from a July 31, 2015 Memorandum Opinion and Order in which Judge Lamberth granted the CFTC summary judgment on Counts I and II of a Complaint filed against Intrade and TEN on November 26, 2012.

In granting summary judgment to the CFTC, the Court found that TEN and Intrade permitted U.S. customers to trade 5,503 binary option contracts involving CFTC-regulated commodities from September 2007 through June 25, 2012 in violation of the CFTC’s ban on off-exchange options trading. The Court also found that TEN violated a 2005 Cease and Desist Order that the CFTC issued against TEN for similar conduct by, among other things, (1) allowing U.S. customers to trade those 5,503 binary option contracts, (2) failing to have blocks in place for U.S. customers on 2,027 prohibited binary option contracts, and (3) lifting blocks on prohibited binary option contracts. As a result, the Court permanently enjoined TEN and Intrade from further violating the CEA and CFTC Regulations but deferred a decision on disgorgement and a civil monetary penalty.  Subsequently, the CFTC voluntarily dismissed Count III and the parties reached a resolution in which Intrade and TEN disgorged and distributed to U.S. customers almost $250,000.

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