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Financial Services Law Insights and Observations

CFTC orders unregistered respondents to pay $2.6 million for fraudulent solicitations

Securities CFTC Enforcement Commodity Exchange Act Settlement


On February 23, the CFTC announced a $2.6 million settlement with a North Carolina-based company and its president for allegedly acting as unregistered commodity trading advisors and commodity pool operators, and for advertising without making required disclosures. Among other things, the respondents allegedly engaged in binary options solicitation and trading fraud through the operation of two webpages and related social media channels. According to the CFTC, the respondents made numerous false statements to solicit business, which claimed that traders could choose from the company owner’s winning strategies to earn significant profits. However, the CFTC stated that the owner was not actually a successful trader and had an overall losing trading record. Additionally, the respondents distributed client testimonials and training videos without providing disclosures required under CFTC regulations. As a result, ten participants lost roughly $410,000 in a managed account trading pool, while approximately 1,600 customers lost at least $945,000 through fraudulent solicitations for binary options signals, trainings, and strategy course offerings. While the respondents did not admit or deny any of the allegations, they agreed to pay $409,965 in restitution, $896,673 in disgorgement, and a $1,306,638 civil monetary penalty. Additionally, the respondents must cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations. The order also permanently bans the respondents from trading on, or trading subject to, the rules of any CFTC-registered entity, and from engaging in any activities requiring CFTC registration. Respondents are also prohibited from, directly or indirectly, entering into any transactions involving commodity interests.