Blowing the Whistle on Illegal Binary Options: SEC Whistleblowing

Binary options fraud preys on investors by manipulating supposedly straightforward bets on an asset’s future price.

Fraudsters might use unregistered platforms, refuse to credit accounts, manipulate trading software to make you lose, or steal your identity. Unlike legitimate binary options, these platforms are rigged against you, making it nearly impossible to make money.

There is significant impact on investors who fall victim to binary options frauds. Not only do they incur tremendous financial losses, but they also suffer emotional distress. Their hard-earned money is essentially stolen by fraudsters with limited options for recovering it.

It also creates distrust in the market, discouraging other investors from entering legitimate binary options trades. This results in a major loss of confidence in the financial system.

Those who fall victim of binary options frauds, or those with inside knowledge of a binary options fraud scheme, can report their concerns to the SEC. In some cases, some may even be eligible for rewards of up to 30% if the sanctions collected by the SEC exceeds $1 million.

Continue reading to learn more about how to spot binary options fraud and your rights.

Legitimate binary options trading is overseen by the SEC and CFTC. The platforms and terms are clear and there is a focus on transparency, fairness, and growth. Illegal binary options on the other hand, utilize unregistered platforms, manipulation, and deception.

Below are some red flags of binary options fraud:

• Unregistered platforms: these platforms operate outside of regulatory oversight from the SEC or CFTC, thus making them inherently risky. Investors should perform due diligence on the company and founders prior to engaging with any investment platform.
• Manipulation: the software that the fraudster requires traders to use is rigged so that they always win, no matter how favorable the market conditions are. These platforms can also display fake information to lead victims on.
• Withdrawal Difficulty: illegal binary options platforms make it difficult for investors to withdrawal their funds. This is because the funds that have been deposited are likely used at the expense of the creators, or to perpetuate additional frauds.

If you notice one or more of these warning signs, consider reporting it to the SEC or CFTC. Even if you haven’t been directly affected, you can still be a whistleblower by reporting suspected binary options fraud.

Spot Tech House Ltd. (April 16, 2021)

The Securities and Exchange Commission charged Israeli-based Spot Tech House Ltd., formerly known as Spot Option Ltd., and two of its former top executives with deceiving U.S. investors out of more than $100 million through fraudulent and unregistered online sales of risky securities known as binary options.

On November 12, 2021, the U.S. District Court for the District of Nevada entered a final consent judgment as to defendant Ran Amiran. Without admitting or denying the allegations, Amiran agreed to pay $103,365 in disgorgement, $18,508 in prejudgment interest, and a $78,000 civil penalty, and consented to permanent injunctions against further securities violations and the sale of binary options.

On January 6, 2023, the Court entered default judgments against Spot Tech House Ltd. and Malhaz Pinhas Patarkazishvili (also known as Pini Peter), who failed to appear or respond. Spot Option was ordered to pay $140,644,654.22 in total disgorgement, prejudgment interest, and civil penalties.

Securities and Exchange Commission v. [Defendants] (October 9, 2019)

The Securities and Exchange Commission charged two foreign individuals with defrauding more than 2,800 U.S. investors and causing them to lose over $5 million through online sales of high-risk securities known as binary options. On August 27, 2020, the U.S. District Court for the Eastern District of Washington entered final consent judgments in this matter.

Without admitting or denying the allegations, these individuals agreed to jointly-and-severally pay $560,000 in disgorgement and prejudgment interest, and each agreed to pay a $350,000 civil penalty. The two individuals consented to injunctions against further violations of the securities registration provisions of Section 5 of the Securities Act of 1933 and the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The two defendentw also consented to injunctions against selling binary options in the United States.

The SEC Whistleblower Program incentivizes individuals to report violations of securities laws, including illegal activity related to binary options.

The program offers financial rewards to whistleblowers whose information leads to successful enforcement actions. These awards can range from 10% to 30% of the monetary sanctions collected. The SEC seeks credible evidence of fraudulent practices, such as:

• Platforms operating without proper registration.
• Misrepresentation of profits and risk.
• Platforms manipulating trading software to benefit themselves.
• Difficulty withdrawing funds from a binary options account.
• High-pressure sales tactics used to coerce investments.

The program safeguards individuals who report fraud from retaliation. This might include termination, demotion, pay reduction, negative performance reviews. But it can also include more emotionally damaging forms of retaliation, such as social isolation, threats, intimidation, or harassment. If you suspect you’re being retaliated against for whistleblowing, it’s crucial to document everything and seek legal advice.

With specific, credible, and timely information in hand, you may report your concerns using the SEC’s online Tip, Complaint, or Referral (TCR) system: https://www.sec.gov/whistleblower. You can also mail your complaint to the SEC Office of the Whistleblower, 100 F Street, NE, Washington, DC 20549, or fax it to (703) 813-9322. Your information can trigger investigations, expose broader fraudulent schemes, and ultimately protect investors from further harm.

The SEC website publishes details of successful enforcement actions exceeding $1 million, enabling whistleblowers to apply for potential awards. Consulting with a securities attorney is recommended for a complete understanding of your rights and the whistleblower program, and to maximize reward potential and protection.

We’ve been helping securities fraud whistleblowers since the beginning of the whistleblower award program in 2010, and even helped write the rules that make up the laws that protect and reward whistleblowers.

Our team consists of leading legal and financial experts, such as Of Counsel Allison Herren Lee, former commissioner and Acting Chair of the SEC, and Stephen M. Kohn, who is behind the largest awards in history.

If you suspect your binary options platform is engaging in fraudulent activity and have identified red flags like those mentioned above, get in touch for a free and confidential consultation.