CFTC updates on its action against binary options scam Berkley Capital Management

The United States Commodity Futures Trading Commission (CFTC) has provided information on the progress of its action against a $4.8 million fraudulent binary options scheme and the individuals behind it. The information is contained in a document filed by the regulator with the Illinois Northern District Court on January 26, 2022, and seen by FX News Group.

Let’s recall that, on May 1, 2019, the CFTC filed its complaint against William Thomas Caniff, Arie Bos, Berkley Capital Management, LLC, BBOT 1, LP, and Berkley II, LP. The Complaint charged the Defendants with fraud in connection with a scheme whereby they are alleged to have fraudulently solicited and accepted at least $4.8 million from at least 62 commodity pool participants for the purpose of trading binary options in pool accounts to be managed by BCM.

Caniff is alleged to have lied on his account application at the binary options trading firm, the North American Derivatives Exchange, Inc. (“NADEX”), to conceal an extensive criminal background. Caniff used only a small portion of participants’ funds to trade binary options through this NADEX account and sent Bos fabricated statements reflecting exaggerated reports of profits made while trading.

The CFTC also alleges that Bos ignored numerous red flags and recklessly accepted Caniff’s reports of profitable trading without reasonably verifying the results and then used those results to both solicit participants with claims of past profitable trading and to generate false statements that he sent to them showing grossly-inflated profits.

Caniff is alleged to have misappropriated a substantial portion of the participants’ funds, paying Bos and himself between $1.1 million to $1.2 million each as “fees” based on false profits. The Complaint also alleges that Caniff misappropriated funds to pay some participants a total of $2.3 million in a manner akin to a Ponzi scheme, leaving an investor shortfall of approximately $2.5 million.

According to the latest update, Bos is a defendant in a bankruptcy proceeding in the Netherlands. Most of the creditors to the bankruptcy who are likely to file claims are also among the alleged fraud victims in the case brought by the CFTC in the United States. A proposal to resolve the bankruptcy was made by Bos and accepted by the creditors on January 12, 2022.

According to the bankruptcy trustee, should the Netherlands court ratify the proposal, Bos will, nevertheless, be precluded from invoking the final discharge before the Illinois Northern District Court. Further, the Netherlands’ creditors who are Bos’ investors will not be precluded from taking recourse in the U.S. on any of the assets of the Defendants in the CFTC case, including those owned by Bos.

The CFTC also notes that should it prevail in its case against the Defendants, their assets in the U.S., including those frozen in this case, will be applied to defray the remaining balance owed Defendants’ victims, with an adjustment for payments already made to those victims through the Netherlands bankruptcy.

On January 26, 2022, the CFTC moved for an extension of the discovery period, currently scheduled to end on February 1, 2022, by four months to June 1, 2022 and extension of the deadline for dispositive motions to September 1, 2022.