Binary Options trading firm and its principals charged with $4.8 million fraud scheme
The Commodity Futures Trading Commission (CFTC) has issued an announcement to inform about the filing of a civil enforcement action (Complaint) against William Thomas Caniff of Steubenville, Ohio, Arie Bos, of Rotterdam in the Netherlands, their company, Berkley Capital Management, LLC (BCM), a Wyoming limited liability company with offices in Ohio and the Netherlands, and two pools that BCM operated as Delaware limited partnerships with offices in Wintersville, Ohio, BBOT 1, LP (BBOT) and Berkley II, LP (Berkley II) (collectively, defendants).
The Complaint charges that the defendants fraudulently solicited more than $4.8 million from 62 pool participants to trade binary options at the North American Derivatives Exchange (NADEX), a designated contract market located in Chicago, Illinois. As alleged, a mere fraction of participant funds were traded at NADEX, with at least $2.3 million being misappropriated, leaving a shortfall in excess of $2.5 million owing to participants. The Complaint also charges Caniff with filing a false statement with NADEX and Bos with issuing false statements to a participant.
James McDonald, the CFTC’s Director of Enforcement, commented: “As this case shows, the CFTC continues its commitment to rooting out fraud in our markets. As alleged here, the defendants perpetrated their fraud by lying to the exchange, lying to customers, and pocketing millions of dollars in customer funds, instead of trading them for customers as promised.”
Court Freezes Defendants’ Assets
On May 1, 2019, Judge Robert M. Dow, Jr. in the U. S. District Court for the Northern District of Illinois entered a Statutory Restraining Order freezing the assets of Caniff, Bos, BCM and the two pools, BBOT and Berkley II, and prohibiting the destruction of their books and records.
A hearing on the CFTC’s Motion for a Preliminary Injunction has been set for May 22, 2019.
According to the Complaint, beginning in at least January 2016, Caniff and Bos formed a partnership called BCM and offered prospective pool participants in the Netherlands and the U.S. the opportunity to trade binary options at NADEX through the BBOT and Berkley II pools. The Complaint alleges that Caniff falsified the application he made to open BBOT’s pool account at NADEX and the Complaint charges him with making a false statement to a NADEX to conceal his personal criminal background. NADEX would have refused to open the account had he answered truthfully.
The Complaint alleges that BCM’s participants paid more than $4.8 million for the purpose of trading binary options, but Caniff only sent $85,000 of their money to NADEX. Instead, Caniff used approximately $2.3 million to repay other participants and paid himself and Bos approximately $2.3 million in management fees, leaving more than $2.5 million owing to participants.
As further alleged in the Complaint, Caniff sent Bos false reports of the pools’ daily trading activity at NADEX. Bos, in turn, used Caniff’s reports to prepare information that he gave to prospective participants in the Netherlands and in the U.S. to invest in BCM’s pools. Bos’ false solicitations included claims of profits having been earned by BBOT during months when the BBOT NADEX account had not even been funded and reported profits for the Berkley II pool when a Berkley account at NADEX was never opened. Further, Bos told prospective participants that BCM’s fund had risen to $5.5 million by the end of 2016 which was false because the combined balance of its bank and trading accounts was a mere $277,961.89. In addition to fraudulently soliciting participants, Bos is also charged with sending false statements to at least one participant, reporting unchanged balances when he knew that management fees were still being paid out of the pool.
In its continuing litigation against the defendants, the CFTC seeks full restitution to defrauded participants, 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, as charged.
On May 2, 2019, Caniff was arrested in connection with a related case pending in the Northern District of Illinois (See Case No. 1:19-cr 332, USA v. William Caniff).
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers to ensure the wrongdoers are held accountable.
CFTC Division of Enforcement staff members responsible for this action are Susan B. Padove, Joseph Patrick, Lindsey Evans, and Scott R. Williamson.
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