The U.S. Commodity Futures Trading Commission (CFTC) filed fraud charges against two affiliate marketers for binary options trading.
In its complaint, the CFTC alleged that David Sechovich and Peter Szatmari, the two affiliate marketers, created and distributed millions of fraudulent solicitations to open and fund retail binary options trading accounts on websites operated by unregistered, off-exchange brokers.
Sechovich and Szatmari’ marketing materials with numerous false or misleading statements, including:
- Misrepresenting that trading binary options would generate significant, even guaranteed, profits while minimizing or disclaiming any risks;
- Claiming that the automated trading software had been tested and generated profits when, in reality, the software had not been tested, did not work as claimed, and in some cases did not exist;
- Portraying actors or fake personalities as actual owners or users of the automated trading software, without disclosing that they were not real users of the software; and
- Depicting fictitious trading results as real.
Additionally, the commodity futures trading regulator alleged that both affiliate marketers failed to disclose that they received a fee from the binary options brokers that they recommended every time a new account was opened and funded as a result of their solicitations.
Furthermore, Sechovich and Szatmari did not reveal that the fee was their only reason for recommending the binary options brokers. The allegedly generated at least $3.8 million in profits.
The CFTC sought $2.8 million in penalties and restitution form Sechovich to settle the fraud charges against him. The Commission also ordered him to stop engaging in any activity that violates the Commodity Exchange Act and CFTC regulations.
In addition, the commodity futures regulator ordered Sechovich to return more than $1.8 million to customers who were victims of their fraudulent marketing and to pay $949 in civil monetary penalty.
The CFTC’s litigation against Szatmari is still ongoing. It is seeking full restitution to defrauded individuals, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations.