The GreyMountain Management (GMM) case, linked to the Cartu brothers and the Wirecard scandal, is a significant event in the binary options fraud landscape. It highlights a complex international operation involving fraudulent schemes and the manipulation of financial transactions. Regulatory actions, especially by the CFTC and Canadian authorities, alongside legal proceedings in Ireland against GMM‘s directors, continue up until today.
The Dublin-Based Fraud Scheme
The Dublin-based binary options fraud scheme GreyMountain Management (GMM), operated by the Cartu brothers—David Cartu, Joshua Cartu, and Jonathan Cartu—continues to unfold as one of the most significant binary options fraud cases. It is intricately linked with Wirecard, the notorious German fintech that collapsed in June 2020. This complex network, stretching from Israel across various countries, involved massive fraudulent binary options schemes and elaborate financial transactions designed to obfuscate the flow of illicit funds.
The U.S. Commodity Futures Trading Commission (CFTC) has taken significant action against this fraudulent scheme, highlighting the case’s scope by ordering monetary sanctions exceeding $204 million against the perpetrators behind GMM. This case underscores the severe implications of GMM‘s operations and the extensive efforts by regulatory bodies to combat such sophisticated fraud schemes. The CFTC has recently announced a significant whistleblower award connected to the GMM scheme.
Canadian regulators have indeed taken action against the GreyMountain Management (GMM) scheme, operated by the Cartu brothers. Specifically, the Ontario Securities Commission (OSC) has been involved in regulatory actions against David, Jonathan, and Joshua Cartu, accusing them of binary options fraud.
The Canadian OSC has accused them of illegal and fraudulent brokerage. In May 2021, OSC settled with David Cartu, who agreed to a seven-year ban and a CAD 300,000 penalty. Later, Ontario’s Capital Markets Tribunal ordered Jonathan Cartu and Joshua Cartu to pay CAD 3.3 million.
The GMM Wirecard Connections
Further complicating GMM‘s story is its apparent joint venture with Wirecard, indicating a symbiotic relationship between the binary options fraud operations and Wirecard‘s payment processing capabilities. This partnership not only facilitated the operations of GMM but also implicated Wirecard in the broader network of binary options fraud, marking a critical point in the unraveling of Wirecard‘s operations (FinTelegram News).
The headquarters of the GreyMountain Management (GMM) scheme was in Dublin, operated by GreyMountain Management Ltd, which was liquidated in 2017. GMM investors have taken legal action against the directors of GMM in Ireland, with a case involving 35 investors who claim to have lost more than €4 million in an electronic trading scam being admitted to the Commercial Court. The Irish High Court found that the Canadian-Israeli brothers David Cartu and Jonathan Cartu were shadow directors of GMM who had “syphoned off considerable sums of money” leaving it just €600,000 to fulfill its obligations. The judge made them “personally liable to Mr Powers for the loss he suffered.”
The link between GMM and Wirecard was the then Wirecard UK & Ireland CEO Michelle Molloy. Her son, Ryan Coates, worked at GMM through her agency. Molloy later moved to the Cartu brothers at short notice after leaving Wirecard. Wirecard and GMM had their offices in the same office building in Dublin.
The association with Wirecard extended beyond operational synergies, as GMM‘s directors founded Mega Optimization Limited, later known as MegaCharge, positioning it as a successor to GMM. However, planned as a licensed financial services provider, MegaCharge encountered significant hurdles, reflecting the ongoing challenges faced by entities linked to GMM and Wirecard amidst regulatory scrutiny and legal challenges.
Read our GMM reports here on FinTelegram.
The Binary Options Fraud Era
Binary options were first born in the Israeli online gambling scene in 2010 and consequently were initially regulated as gambling in the UK and other jurisdictions. Binary options were later regulated as financial instruments. Until they were banned between 2017 and 2018, binary options platforms were extremely popular and defrauded hundreds of thousands of retail customers of tens of billions.
The Israeli binary options executive Lee Elbaz was arrested in 2017. She was the CEO of the Israeli Yukom Communications Ltd, a boiler room operator in the binary options space. She was charged with three counts of conspiracy to commit wire fraud. A jury found her guilty of all three counts. Consequently, she was sentenced to 22 years and ordered to pay $28 million in restitution.
Binary options have been banned in Israel and the European Union (EU) due to concerns over fraudulent activities and significant investor protection issues. Israel became the first country to impose a domestic ban on binary options in 2016, later extending this ban to overseas sales in 2017.
In the EU, the European Securities and Markets Authority (ESMA) agreed on measures in March 2018 to prohibit the marketing, distribution, or sale of binary options to retail investors.
