Binary Options operator Jared Davis (OptionMint, OptionKing) hit with $561K penalty
The U.S. derivatives market regulator Commodity Futures Trading Commission (CFTC) has announced that the U.S. District Court for the Northern District of Ohio entered a consent order on April 27 for a permanent injunction, restitution, and equitable relief against Jared J. Davis, a former resident of Ohio. Davis, at times, conducted business as Erie Marketing, LLC.
The consent order resolves a CFTC action filed on September 17, 2019. The complaint alleged, among other things, that Davis defrauded customers through a global binary options business he created and operated.
The order requires Davis to pay $561,971 in restitution to victims of the fraudulent scheme. The order also permanently prohibits Davis from engaging in further violations of the Commodity Exchange Act and CFTC regulations, as charged, and imposes permanent registration and trading bans.
The order finds that, from approximately July 2012 through June 2016, Davis fraudulently solicited and accepted approximately $10 million from customers in the U. S. and elsewhere to trade off-exchange binary options on commodities, forex, individual stocks and stock indices. According to the order, Davis executed his scheme through internet marketing campaigns, various websites, and call centers using tradenames such as Option Mint, Option King, and Option Queen. The order also finds Davis defrauded customers by making misrepresentations and omissions of material facts, including failing to disclose that he effectively took the opposing position on each trade and failing to disclose that he frequently had the trading platforms manipulate the options trading software settings to increase the odds of customer losses.
The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
Related Criminal Matter and SEC Actions
In a separate action, the U.S. Attorney’s Office for the Northern District of Ohio charged Davis with three counts of tax evasion, and his company, Erie Marketing, LLC, with 11 counts of wire fraud. The superseding information was based on much of the same conduct alleged in the CFTC’s complaint. Davis pleaded guilty to 11 counts of wire fraud on behalf of Erie Marketing, LLC and to three counts of tax evasion individually. On January 27, Jared Davis was sentenced to 30 months of incarceration followed by three years of supervised release. He was also ordered to pay a $300,000 fine, $1,039,208 in restitution to the Internal Revenue Service (IRS), and to be jointly and severally liable for the debts of Erie Marketing, LLC, including $656,493.20 in restitution to victims and a $4.4 million fine.
In addition to the criminal action, the U.S. Securities and Exchange Commission (SEC) charged Davis in a related enforcement action and entered into a partial settlement against him on February 22, 2019, providing that the court will determine disgorgement and civil penalties at a later date. The SEC’s action remains pending.
The CFTC said that it appreciates the assistance of the U.S. Attorney’s Office for the Northern District of Ohio, the Federal Bureau of Investigation’s Cleveland Field Office, the IRS Criminal Investigation, and the SEC.