The US Commodity Futures Trading Commission announced a civil complaint this month against Israeli-American binary options operator Jason B. Scharf, alleging that he and the companies he controls have swindled more than $16 million from at least 8,000 victims, most of them located in the United States.
A federal district court with the Middle District of Florida unsealed the civil CFTC complaint on July 10, alleging that Scharf, who currently lives in Valley Village, California, has defrauded investors through the web site citrades.com and AutoTradingBinary.com.
The complaint also named Michael Shah and his company Zilmil, Inc., of Jacksonville, Florida, as defendants.
According to the complaint, Shah was an affiliate marketer for the web site citrades.com, orchestrating advertising campaigns that lured investors to the site.
According to the CFTC complaint, Scharf and the companies he controlled and/or controls — 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. “fraudulently solicited 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.”
Scharf allegedly carried out this fraud from at least January 2014 until the present.
The complaint further alleged that once customers deposited money with CITrades, they did not get it back.
Instead it was routed through numerous offshore companies and bank accounts and ultimately found its way back to the beneficiaries.
The CFTC accused Shah, the affiliate marketer, of “attracting 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.”
In the past, affiliate marketers, who created fraudulent videos and web sites promoting binary options trading, have not been in the crosshairs of law enforcement, but the CFTC action signals that this situation could be changing.
While Shah is American, Israel has a large affiliate marketing industry as well.
James McDonald, the CFTC’s Director of Enforcement, said in a July 12 statement that “this action should send a message to would-be fraudsters that the sort of conduct alleged here will not be tolerated.”
On July 12, 2017, US District Court Judge Brian J. Davis ordered that the assets of Scharf and Shah be frozen. Both men were also prohibited from destroying their records, to which the CFTC now has access.
The CFTC complaint contained a detailed description of how affiliate marketers operate.
The CFTC alleged that Shah’s company, Zilmil, developed and sold autotrading binary options systems that don’t actually work.
“Zilmil ‘s autotrading systems do not work as advertised,” read the complaint, “Instead of placing winning trades as promised, Zilmil’s trading systems place trades that result in customer losses, sometimes depleting the customer’s entire account in just a few hours.”
The CFTC quoted an email exchange between Shah and the operator of CITrades in which the operator wrote delightedly about the way in which the autotrading program was fleecing clients: “The autotrader attached to this is doing its job and is doing it great, crushing people like immediately.”
Zilmil’s autotrading systems included millionairemoneymachine.co, 7daymillionaire.co, moneyplatform.net; binaryboom.co and www.binarymachine.co. CItrades was not their only binary options client.
