Binary options are either a form of gambling or very risky investments. The characterization depends on who is asked. In the U.S. the options are permitted but viewed as a very high-risk investment. In some countries they are viewed as gambling and banned. When the Commission brings an action centered on binary options, the charges typically center on fraud. That was the focus in a case the agency recently settled that was filed last year. SEC v. Senderov, Civil Action No. 19-cv-5242 (E.D. WA. Settled August 31, 2020).
The action named as defendants Anto Senderov and Lior Babazar, both citizens residents of Israel. Defendants own or control two unregistered internet offering binary options brokerages and a call center that solicits investors. The solicitations took place over a three-year period, beginning in January 2014. The two brokerage firms described binary options as profitable investments for all investors, including those with little or no experience.
Investors were told by the call center that they could make large profits working with its experienced professionals. In fact, those at the call center were instructed to lie. Defendants also failed to disclose that the option firms had an interest in investors failing to make money. Through these solicitations Defendants obtained millions of dollars from investors. The complaint alleged violations of Securities Act Section 5 and Exchange Act Section 20(a) tied to violations of Exchange Act Sections 15(a) and 10(b).
To resolve the case each Defendant consented to the entry of a permanent injunction based on Exchange Act Section 10(b) and Securities Act Section 5. The judgment directs that the two Defendants, jointly and severally, pay disgorgement and prejudgment interest in the amount of $560,000. Each Defendant was also directed to pay a penalty of $350,000. And, each Defendant agreed to be enjoined from selling binary options in the U.S. The Court entered the judgments as to each Defendant. See Lit. Rel. No. 24879 (August 31, 2020).