The U.S. citizen Michael Shah and Jason B.Scharf were ordered to pay a total of over $40 million in restitution and penalties to resolve the U.S. CFTC’s suit accusing them of running an unregistered binary options scam and having cheated investors out of millions of dollars.
The Commodity Futures Trading Commission (CFTC) had accused Michael Shah and his business Zilmil Inc., along with California businessman Jason B. Scharf and his global network of companies, of violating trading regulations and defrauding at least 8,000 customers out of more than $16 million.
Shah and Zilmil agreed to pay restitution of $9.3 million and $8.55 million, respectively. Moreover, they have to pay civil monetary penalties of $1 million and $4 million, respectively, according to a consent order. Scharf and his companies were ordered to pay a combined $4.48 million in restitution and $13.4 million in penalties, according to a separate default judgment order.
The CFTC claimed that from at least June 2013 to July 2017, Shah and his Zilmil Inc. recruted retail investors through fraudulent ad campaigns and directed these investors to Sharf’s fraudulent binary options trading websites such as Citrades.com and AutoTradingBinary.com. Scharf and his companies would then make false claims of outsize profits and “guaranteed returns” and present fake customer testimonials to lure customers to set up accounts, according to the agency.
Shah actually marketed for a wide variety of binary options schemes, such as LBinary, Global Trader 365, Vault Options, TraderXP, Trade Rush, Banc de Binary, OptionMint, OptionRally, RBOptions, Bloombex Options, Redwood Options, BeeOptions, Amber Options, OptionsXO, and SpotFN. None of these websites or their operators are or ever have been registered to offer binary options contracts to the public.
The GMM & Cartu Connection
Some of those illegal broker schemes Shah promoted are also connected to GreyMountain Management (GMM) scheme of the Cartu brothers David
The case is CFTC v. Scharf et al., case number 3:17-cv-00774, in the U.S. District Court for the Middle District of Florida.