CFTC Charges Individual and CPOs with Manipulation of Binary Options

The CFTC charged an individual and two affiliated CPOs with engaging in manipulation intended to trigger payouts on binary options.

According to the Complaint, filed in the Southern District of New York, the CFTC alleged that the individual traded large quantities of the U.S. dollar/South African rand currency pair in the foreign exchange spot market in order to drive down the exchange rate and trigger a payout. The CFTC said that the options the individual held were nearing expiration, and would have otherwise expired worthless. The CFTC charged the two CPOs with failing to oversee the business activities of its employees, alleging that the CPOs' supervisory programs either failed to detect or ignored the individuals' suspicious activity.

The CFTC charged the CPOs and the CIO with (i) two counts of violating CEA Section 6(c)(1) ("Prohibition regarding manipulation and false information") and CFTC Rule 180.1(a) ("Prohibition on the employment, or attempted employment, of manipulative and deceptive devices"), and (ii) one count of violating CFTC Rule 166.3 ("Supervision"). The principal was separately indicted by the DOJ in September for similar conduct.

The CFTC is seeking relief in the form of (i) civil monetary penalties, (ii) disgorgement of any ill-gotten gains, (iii) a permanent trading and registration bans and (iv) a permanent injunction on future violations.