Three non-US citizens, Raz Beserglik, Gil Beserglik, and Kai Christian Peterson, are now facing US Securities and Exchange Commission (SEC) charges accusing them of causing investors, including retirees, of losing tens of millions of dollars through the sale of fraudulent binary options via their binary options brokers Morton Finance, Bloombex Options, and Starling Capital. The brokerage firm are also defendants in the regulator’s case.
According to SEC Enforcement Davison Associate Director Melissa Hodgman, investors were promised fast profits. Instead, most of them lost money, with some of them losing all of their life savings.
The regulator’s complaint said that through call centers that were run like boiler rooms in Italy and Germany, salespeople contacted prospective clients and used high pressure tactics to get them to buy speculative binary options. As a result, from 2012 through 2016, investors from the US and elsewhere gave Bloombex Options over $80M to invest. Morton Finance, meantime, had gotten over 8,000 investors to deposit more than $14.75M by 2016. Over 2,700 investors deposited almost three million through Starling Capital. The brokers continued to accept investor funds at least through 2017.
The SEC’s complaint states that binary options, also known as fixed-return options and all-or-nothing options, usually have a value that’s “tied to the price of other financial assets.” It’s up to the investor to decide whether the price of the underlying asset will be higher or lower than a “certain price at a particular time.”
The options are “binary” because there are only two outcomes. Either the investor makes a correct prediction about the underlying asset’s price and in which case stands to make up to 180% of what was invested or, the investor makes an incorrect prediction and is at risk of losing nearly all if not all of what was invested.
With binary options, the holder is not entitled to sell or buy the underlying asset. Meantime, brokers such as the ones operated by the defendants make money when their clients lose money from their trades because then they get to keep the losses.
The Commission contends that employees at the call centers lied to their targets about their names, where they were located, and their expertise regarding securities trading. They then convinced investors to set up trading accounts and deposit large amounts of money in them, all the while claiming that when investors made money, the brokers made money–when the truth was the opposite: the brokers made money if investors lost money on their binary options trades. This means that brokers had no reason to give good investment advice regarding binary options trading to investors. Now, the regulator is seeking disgorgement of ill-gotten gains with interest, permanent injunctions, and financial penalties.
Binary Options Fraud
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