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Broker fined $7m and banned by CFTC in offshore binary options scam

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The Commodity Futures Trading Commission, the US commodities markets and futures trading regulator, has banned Daniel Fingerhut, a US broker based in Florida, from participating in financial markets, following a complaint about a fraudulent off-exchange binary options and digital assets trading scam.

Also sanctioned were Itay Barak and Tal Valariola, who both worked with Fingerhut out of Israel, running Digital Platinum Limited, an offshore brokerage. They are required to pay $7m in disgorgement and civil monetary penalties.

The trio were accused of fraudulently soliciting tens of millions from customers and prospective customers to open and fund off-exchange binary options and digital assets trading accounts. The accounts traded foreign exchange currency pairings, metals and digital assets through websites operated by unregistered binary options and digital assets brokers.

Part of the complaint against Digital Platinum related to the marketing of purportedly successful automated trading systems that traded on behalf of clients in binary options involving commodity interests and digital assets. The marketing videos used typically featured actors posing in front of props like mansions and private jets, claiming that they had become rich while trading.

“These solicitations misrepresented hypothetical and fictitious trading results as real results, and used fabricated customer testimonials,” the CFTC said last week.


Fingerhut was also censured for knowingly making false statements to the CFTC in connection with the investigation into his role in the fraud. This includes statements made under oath. He also tried to avoid providing the regulator with potentially incriminating documents. The CFTC said that it was going to continue to litigate against Digital Platinum and that there are currently two further defendants and one relief defendant who have yet to be named in the case.

Restitution orders may not result in return of funds

The CFTC said that restitution orders of this nature might not result in funds being returned to victims “because wrongdoers may not have sufficient funds or assets.”

The case was facilitated with the active cooperation of the financial regulators in Bulgaria and Israel.

The CFTC said that investors should remain vigilant when entering into trading agreements with offshore brokerages of this nature. This is especially the case if the broker concerned is not registered with onshore, tier one regulators. It encouraged traders who were seeing suspicious activity to report that to it.

CFTC appeals to whistleblowers at brokerage firms

Like other regulators the CFTC is also relying on the help of whistleblowers within offshore brokerages. It said that whistleblowers were eligible to receive between 10 and 30% of the monetary sanctions collected, paid out of the CFTC Customer Protection Fund. This is financed through sanction applied to the the subjects of successful cases.

The UK regulator, the FCA, confirmed in May 2019 that it was introducing a blanket ban on the sale of binary options by brokers under its remit. These are the same as those introduced by the European Securities and Markets Authority. The UK ban travelled a little further, extending to securitised binary options. The UK regulator said that it estimated the ban would save retail traders up to £17m per year and would considerably reduce the risks of fraud by unauthorised entities offering these products.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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