Binary Options operator Jared Davis (OptionMint, OptionKing) sentenced to 30 months
US federal authorities are continuing their crackdown on former operators of fraudulent Binary Options brokerages, with the latest success being a 30 month jail sentence and accompanying $6 million fine/restitution penalty issued to Jared Davis.
However what authorities “got him” on ultimately wasn’t binary options fraud, but rather large scale tax evasion.
Jared Davis, the co-owner of a binary options company headquartered in Sandusky, Ohio, was sentenced to 30 months in prison on Friday, Jan 27. 2023, by U.S. District Judge Jack Zouhary after he pleaded guilty to multiple counts of tax evasion.
According to court documents, between 2012 and 2016, Davis and his business partner ran a binary options investment scheme that regularly committed fraud. One of the multiple entities involved was Erie Marketing LLC, which was headquartered in Sandusky, Ohio. The options businesses used various trade names, including OptionMint, OptionKing, and OptionQueen.
A binary option is a concept in which an investor seeks a future payout based on the future price of a given security or commodity. Binary options are sometimes traded on regulated exchanges that match two investors, one who believes the price of the asset will go up and the other who believes it will go down.
Court documents state that Davis and his partner used call centers, including those run by Erie Marketing LLC, to solicit individual investors in the scheme to deposit money, often through credit cards, into foreign bank accounts that they controlled. Court documents state that Davis used this money to pay expenses, which included employee salaries, facility fees, fees to the companies that supplied the trading platforms on which the options businesses operated, and internet marketing services.
As part of the scheme, Davis created several shell companies and used a network of foreign nationals and foreign bank accounts to receive credit card payments. Court documents state that Davis and his partner ultimately controlled this process and would eventually repatriate the money to a local Ohio bank, using it to pay employees and other expenses.
Davis pleaded guilty in April 2022 to tax evasion after he failed to file personal tax returns for tax years 2014, 2015, and 2016. According to court documents, Davis had a substantial additional tax due and owing for each of 2014, 2015, and 2016 as a result of the options scheme and made numerous attempts to avoid the payment of taxes.
Judge Zouhary also sentenced Erie Marketing, LLC, to serve three years’ probation and to pay a fine of $4.4 million and restitution to all identified victims (a total the United States expects to be approximately $650,000). Further, Judge Zouhary sentenced Davis to 30 months in prison, a fine of $300,000, restitution to the IRS, three years of supervised release, and to be jointly and severally liable for the debts of Erie Marketing, LLC.
The exact restitution will be determined at a later date, but the United States expects that all known victims will be fully repaid from funds already collected.
In a separate but related matter, the CFTC remains in settlement talks with Jared Davis relating to the Binary Options scam itself. Those talks are ongoing.