The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a civil enforcement action charging David Gilbert Saffron of Las Vegas, Nevada, and Circle Society, with fraudulent solicitation, misappropriation, and registration violations relating to an $11 million binary options scheme Saffron operated through Circle Society. The complaint was filed on Monday, September 30, 2019.
On October 3, 2019, the respective I.S. court issued an ex parte order freezing assets controlled by the defendants and preserving records.
Digital assets and other 21st century commodities hold great promise for our economy. Fraudulent schemes, like that alleged in this case, not only cheat innocent people out of their hard-earned money, but they threaten to undermine the responsible development of these new and innovative markets. America must be a leader in this space, and we will only succeed if these markets have integrity.CFTC Chairman Heath P. Tarbert
The Case – Bitcoin and Dollars
According to the complaint, David Gilbert Saffron operated the binary options scheme from at least December 2017 to the present. In doing so, he and his entities fraudulently solicited and accepted at least $11 million worth of bitcoin and U.S. dollars from individuals in the United States to trade off-exchange binary options on foreign currencies (“forex”) and cryptocurrency pairs, among other things.
The scheme fraudulently solicited funds from at least fourteen members of the public to participate in a pool operated by Circle Society, an entity Saffron created and used to perpetrate his fraud, by making false claims of Saffron’s trading expertise and guaranteeing rates of return up to 300%.
Saffron acted and continues to act at all times during the Relevant Period as a commodity pool operator (“CPO”) without being registered with the CFTC, as required by the Commodity Exchange Act (“Act”). From September 6, 2018, through the present, Circle Society acted and continues to act as a CPO without being registered with the CFTC, and Saffron acted and continues to act as an associated person (“AP”) of CPO Circle Society without being registered with the CFTC, as required by the Act.
No trading here – Ponzi scheme
Rather than using pool participants’ funds to trade in binary options contracts as promised, Saffron misappropriated funds, including by retaining participants’ funds in Saffron’s personal electronic cryptocurrency wallet and by using funds to pay other participants, in the manner of a Ponzi scheme. The defendants then lied to participants in order to conceal their misappropriation.
In its continuing litigation, the CFTC seeks full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the Commodity Exchange Act and Commission regulations.