A Florida court has granted the CFTC’s motion for a default judgment against three individuals and their associated companies that were engaged in a fraudulent scheme to solicit retail investors for trading binary options, forex, and cryptocurrencies.
The US derivatives regulator filed its fraud suit in the Southern District of Florida against Florida resident Daniel Fingerhut alongside Tal Valariola and Itay Barak, both from Tel Aviv. The trio was charged with operating an Israel-based marketing company, Digital Platinum Limited (DPL), as well as two associated entities that operated under the brands Digital Platinum, Inc. (DPI) and Huf Mediya Ltd. (Huf) in the US and Bulgaria, respectively.
The collective scheme involved fraudulent ad campaigns that relied on other marketers, known as “affiliates,” to promote trading systems and websites. They attracted their victims by sending misrepresentations about the trading platforms, also paying video producers to make fraudulent testimonials promoting the trading systems.
While the CFTC describes the defendants’ ads as ‘pure fiction,’ the people in the videos told viewers that they were “enjoying rich lifestyles from trading binary options” and purported to show them that their trading balances increase automatically in live accounts.
The alleged marketing scheme also used “numerous false and misleading statements” about automated trading software developed by their companies, which “promised to generate massive and guaranteed profits with zero risk of loss.”
As a result of AIP’s fraudulent solicitations, from January 2014 to June 2016, the binary options brokers received about $13 million from 51,917 investors worldwide, including the United States. As for the crypto scammers, they allegedly had more than 8,043 customers who deposited more than $2 million between October 2016 and August 2018.
Customers who fell victim to the binary options and digital assets campaigns were required to deposit at least $250 initially.
Interestingly, Fingerhut offered to cooperate with the CFTC investigations into the affiliate marketing fraud, also prepared a sworn declaration, and testified as a witness against his former colleagues. But rather than truthfully cooperate, he made false and misleading statements to the CFTC staff to conceal the extent of his role in the fraud and avoid submitting relevant documents and information.
For their crimes, the defendants were required to pay more than $7 million in fines and full restitution of what they had done. Breaking down the monetary penalties, the orders require Fingerhut to pay $400k in disgorgement and a $600k civil penalty, and Barak, Valariola and DPL to pay $3 million in disgorgement and a $3 million civil monetary penalty.
Finally, the CFTC warned victims that although it works closely with authorities to seek the prompt return of all misappropriated funds, wherever situated, they may not recover their lost money because the wrongdoers may not have sufficient funds or assets.