Court warns SEC for its lack of action in Spot Option case
The lack of action by the Securities and Exchange Commission (SEC) in the lawsuit targeting fraudulent binary options scheme Spot Option, now known as Spot Tech House, Ltd, and Malhaz Pinhas Patarkazishvili (Pini Peter), is becoming problematic.
On August 24, 2022, the Nevada District Court issued a notice to the SEC warning it that it may dismiss the case.
The notice says:
“Be advised the official record in this action reflects that this case has been pending for more than 270 days without any proceeding having been taken during such period.
If no action is taken in this case by 09/23/2022, the court shall enter an order of dismissal for want of prosecution”.
The case concerns a multi-million dollar fraudulent scheme involving unregistered offers and sales of security-based “binary options” to retail investors in the United States from at least April 2012 through August 2017. The scheme was overseen by Pini Peter and Ran Amiran through a company they owned and controlled called Spot Option, Ltd now known as Spot Option Tech House, Ltd.
The SEC’s complaint alleges that Spot Option contracted with third parties, which it referred to as “Partners,” “White Labels,” and “Brands”, to market its binary options. Unbeknownst to investors, Spot Option structured its business model so that its Partners were the counterparty on every trade. Under this structure, Spot Option and its Partners made their money principally from investor losses.
According to the SEC’s complaint, to make the scheme profitable, Spot Option set the payout terms on its options in a way that made it likely that most investors would lose all or a substantial portion of their investment within the first five months of trading. Spot Option trained its Partners, however, to deceptively market the binary options as profitable investments.
Spot Option used additional deceptive and manipulative practices to increase investors’ losses and boost Spot Options’ income stream. These practices included manipulating the trading platform to increase the probability that trading would be unprofitable and offering investors a so-called “bonus” to lock-up investor funds and prevent withdrawals, which, when combined with the payout terms, virtually guaranteed investor losses.
Through these and other deceptive and fraudulent acts, Spot Option sought and reached thousands of investors in the United States, including retirees, who traded through its platform. Many of those investors lost most of their money including, in some cases, hundreds of thousands of dollars meant for retirement. Spot Option and its Partners, on the other hand, raked in millions in profits, the regulator says.
The SEC secured entries of default against Spot Option and Pini Peter in October 2021. However, the regulator has not moved for default judgments.