Binary Options Scheme: SEC Continues Its Anti-Fraud Efforts

Binary options are securities that pay out depending on the outcome of a "yes/no" proposition. An example proposition would be whether a specific equity security will close at or above a specified price on a given trading day.

The Securities and Exchange Commission (SEC) today charged Mark Suleymanov of Glen Cove, New York, with utilizing an online binary options scheme between 2012 and 2016 to defraud investors of approximately $4 million.

The Binary Options Scheme

Options were sold on a website called "SpotFN," as well as other websites Suleymanov operated. In the selling of these options, Suleymanov allegedly:

  • Misrepresented the profitability of investing in the binary options
  • Used software to manipulate investors' trading results in order to increase investor losses
  • Prevented many investors from withdrawing their funds
  • Falsely claimed on the SpotFN website that an investor's funds would be held in a separate account and used only for trading options, not for SpotFN's business expenses
  • Commingled investor funds in his bank accounts and misused certain of the funds for business and personal expenses, despite assurances to the contrary

The SEC has charged Suleymanov with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and the registration provisions of Section 5 of the Securities Act.

The SEC is seeking a permanent injunction, disgorgement that includes prejudgment interest, as well as a civil penalty. Suleymanov has agreed to a bifurcated settlement where he will be permanently enjoined from these provisions.

Additional details are available in the full SEC press release - read here.

Do Your Claims Meet Regulations?

As the SEC routinely includes communications with the public as an Exam Priority, this should cause your firm to pause and reflect on its current marketing practices.

Are the statements, claims, and disclosures your firm makes to clients accurate and complete?

Is your firm aware of the most recent changes to regulations and reviewing current practices?

The best way to avoid troublesome and costly enforcement is the implementation of up-to-date policies and procedures guiding your firm's marketing efforts and disclosure of information.

If you are concerned that your marketing materials or customer communications and disclosures fail to meet regulatory standards, now is the time to take action.

We can help you with your review and identify areas of improvement to keep your firm on the right side of regulations. Contact Jacko Law Group, PC, for any assistance needed.

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