The United States Securities and Exchange Commission (SEC) has taken action against a fraudulent binary options scheme which has resulted in losses of more than $50 million.

The regulator has filed a complaint against Jonathan (Yoni) Mimun (also known as Jonathan (“Yoni”) Maymon) and Ronn BenHarav, the individuals behind Porter Finance and Dalton Finance (the “Porter Brokers”).

The case concerns a multi-million dollar scheme to defraud retail investors in the United States through the unregistered offer and sale of security-based binary options from at least December 2014 through June 2017.

Mimun and BenHarav fraudulently and without registration offered and sold binary options through their ownership, operation, and control of two Internet-based brokers doing business under the names (a) Porter Finance and (b) Dalton Finance.

The Porter Brokers—which secretly made money from investors’ trading losses—were unincorporated brand names that functioned through a combination of websites, call centers, and straw companies that, among other things, held bank and credit-card-processing accounts used to facilitate their operations. Although they intentionally targeted U.S. investors, neither the Porter Brokers, websites, call centers, nor straw companies registered with the SEC as a broker or dealer or were ever associated with a SEC-registered broker or dealer.

The defendants owned and controlled JMRB Media, Ltd. and a number of other affiliated companies. JMRB employed as many as 160 persons at one or more boiler-room-like call centers soliciting investors for the Porter Brokers. At the Defendants’ direction, JMRB sales agents solicited investors in the United States to open and fund binary option trading accounts with the Porter Brokers by, among other things, representing that they were experienced market professionals providing expert advice and that the brokers (and the sales agents) only made money when investors made money.

In reality, the interests of the Porter Brokers and JMRB were not aligned with the investors’ interests. The entities controlled by the Defendants made their money from investors’ losses—they were the counterparty to their clients’ trades—and the Defendants rigged the trading to maximize the likelihood investors lost their money.

Through their ownership and operation of the Porter Brokers and JMRB, Defendants managed, directed and ultimately controlled the fraudulent solicitation of tens of thousands of investors in the United States and the selling of tens of thousands of binary options referencing securities worth tens of millions of dollars to those investors. Defendants obtained tens of millions of dollars in deposits from investors in the United States, and most of them lost all or most of their deposited money. The scheme of Defendants preyed especially on the elderly who, at the direction of JMRB employees, liquidated retirement accounts to fund accounts with the Porter Brokers.

Investors residing in the United States funded their trading accounts by wire and credit card, ultimately losing millions of dollars to the Porter Brokers. Some investors made six-figure deposits by wire transfer. From March 2016 to April 2017, U.S. investors deposited at least $18 million by credit card. As evidenced by bank records, nearly $50 million in investor funds—a significant percentage from the U.S.—went to the straw companies holding bank accounts used by the Porter Brokers and controlled by the Defendants through JMRB. Very little of these funds were returned to the investors.

The SEC alleges that the defendants violated the antifraud provisions of Sections 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 77q(a) and 15 U.S.C. §§ 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b‒5].

Defendants are liable directly for these violations and, with respect to violations of the Exchange Act, as control persons under Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] for violations of Sections 10(b) and 15(a) of the Exchange Act [15 U.S.C. § 78o(a)], and Rule 10b-5 thereunder, committed by the Porter Brokers and JMRB. Defendants’ offerings of binary options also violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].

Defendants are also liable under Section 15(b) of the Securities Act [15 U.S.C. §§ 77o(b)] and Section 20(e) of the Exchange Act [15 U.S.C. § 78t(e)] for aiding and abetting violations of the aforementioned antifraud provisions of the Securities Act and the Exchange Act committed by JMRB and its employees.

To deter additional fraud, recover fraudulently obtained funds, and otherwise enforce the federal securities laws that the defendants and the entities they controlled violated, the SEC seeks civil monetary penalties as well as remedial ancillary relief, including defendants’ disgorgement of ill-gotten gains, prejudgment interest on ill-gotten gains, a civil injunctive order against further violations of the federal securities laws, a conduct based injunction, and other appropriate relief.