An Israeli citizen has been ordered to disgorge the US$7 million he allegedly received from his involvement with a fraudulent binary options scheme, the U.S. Commodity Futures Trading Commission (CFTC) says.
The U.S. district court for the Northern District of Illinois issued a consent order requiring disgorgement by Yakov Cohen stemming from his role in a scheme that solicited investors to trade binary options in unregistered off-exchange trades through websites, operating as BigOption, BinaryBook and BinaryOnline.
According to the order, the scheme allegedly took in over US$165 million from investors, who lost over US$112 million as a result.
The order resolves the CFTC’s allegations against Cohen, which were brought in 2019 in a civil lawsuit that continues against various co-defendants, which haven’t appeared to defend the action.
“The defendants falsely represented their interests were aligned with their customers’ interests, when they actually profited from their customers’ losses,” the CFTC said.
The commission said the defendants also falsely claimed their trades were market transactions “when they were merely book entries whose outcomes were manipulated by the defendants or others acting at their request.”
Additionally, the regulator alleged the defendants misrepresented their financial expertise and custody arrangements, and that the binary options they offered were profitable when approximately 95% of traders actually lost money.
Cohen previously pled guilty to criminal charges, including wire fraud and conspiracy, filed in a parallel action in 2019. He was sentenced to 66 months in prison and ordered to pay a US$7-million penalty in that case.
“The disgorged funds will be returned to customers who suffered losses in connection with the fraudulent conduct through a victim fund administered by the Department of Justice,” the CFTC said.