US CFTC Bring New Enforcement Action In Scheme Involving Binary Options and Cryptocurrency

April 19

The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a Complaint in the U.S. District Court for the Eastern District of New York charging Defendants Blake Harrison Kantor, who frequently uses the alias Bill Gordon, and Nathan Mullins, and the entities Blue Bit Banc, Blue Bit Analytics, Ltd. with operating a  fraudulent scheme involving binary options and a virtual currency known as ATM Coin.  The district court, on April 17, 2018, entered a Statutory Restraining Order freezing the Defendants’ assets, prohibiting them from destroying their books and records, and granting the CFTC immediate access to those records.  On April 16, 2018, the United States Attorney for the Eastern District of New York filed a parallel criminal action, which charges Kantor with fraudulent conduct.

Binary options are transactions that allow customers to make predictive trades as to whether the price of a certain commodity will rise or fall by a certain date and time.  As alleged in the CFTC’s Complaint, binary options must be traded on a registered board of trade in order to be lawfully offered in the United States.  The Complaint alleges that none of the Defendants execute transactions on a registered board of trade and none has ever been registered with the CFTC in any capacity.

The Complaint alleges that since at least April 2014 and continuing to the present, the Defendants have solicited potential customers through emails, phone calls, and a website to purchase illegal off-exchange binary options.  According to the Complaint, Defendants falsely claimed customers’ accounts would generate significant profits based upon Kantor’s purported past profitable trading.  Also according to the Complaint, Defendants misappropriated a substantial amount of the customer funds for the Defendants’ own personal use.

Defendants sought to cover up their misappropriation by inviting customers to transfer their binary options account balances into a virtual currency known as ATM Coin.  According to the Complaint, some customers agreed to transfer their funds into ATM Coin, and at least one customer sent additional money to Defendants to purchase additional ATM Coin.  Defendants then allegedly misrepresented to customers that their ATM Coin holdings were worth substantial sums of money.

David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. He is currently the Chairman of the Litigation Department of the firm’s New York office. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. Since 2008, David has been included in Chambers for his expertise in international arbitration.