US Court Orders $451 Million Penalty in Massive Binary Options Fraud Scheme

The Commodity Futures Trading Commission (CFTC) announced that the U.S. District Court for the Northern District of Illinois has entered an order of default judgment against five offshore corporate entities and three individuals, finding them liable for extensive fraud and violations of the Commodity Exchange Act (CEA) and CFTC regulations. The court ordered the defendants to pay, jointly and severally, $112.9 million in restitution to victims alongside a $338.7 million civil monetary penalty, totaling over $451.6 million. In addition to the monetary sanctions, the court imposed permanent injunctions against future CEA violations, banned the defendants from registering with the CFTC, and permanently prohibited them from trading in any CFTC-regulated markets. The judgment targets Israeli citizens Yossi Herzog, Lee Elbaz, and Shalom Peretz, along with five offshore entities: Yukom Communications Ltd. (Israel), Linkopia Mauritius Ltd. (Mauritius), Wirestech Limited d/b/a BigOption (Marshall Islands), WSB Investments Ltd. d/b/a BinaryBook (Anguilla, the United Kingdom, St. Vincent and the Grenadines, and Gibraltar), and Zolarex Ltd. d/b/a BinaryOnline (Marshall Islands). According to the court order, which stems from a CFTC enforcement complaint filed in August 2019, the defendants operated an unlawful retail binary options scheme from March 26, 2014, through August 12, 2019. The enterprise solicited customers across the United States and globally through deceptive websites, emails, and phone solicitations under brand names including BigOption, BinaryBook, and BinaryOnline. The findings show that sales agents and brokers misrepresented their names, physical locations, and financial expertise while falsely claiming binary option investments were lucrative. In reality, the vast majority of clients lost money. Furthermore, the operators misappropriated customer funds, manipulated platform risk settings to ensure customer trades were not profitable, and used undisclosed terms on "bonuses" and "risk-free trades" to prevent clients from withdrawing their money. The enforcement action follows parallel criminal proceedings and earlier settlements connected to the scheme. Lee Elbaz was previously convicted by a federal jury of wire fraud and conspiracy in August 2019, resulting in a 20-year prison sentence and a $28 million restitution order. Another co-conspirator, Yakov Cohen, previously agreed to a CFTC consent order requiring $7 million in disgorgement, pleaded guilty to criminal conspiracy charges, and received a 5.5-year prison sentence with $7 million in criminal restitution. The CFTC continues to advise retail investors to exercise extreme caution with binary options trading platforms and to verify the registration status of any financial firm via the National Futures Association's BASIC database before depositing funds.