The US Commodity Futures Trading Commission (the “CFTC“) has filed a complaint in the US District Court for the Western District of Texas, against five Canadians and one American, alleging that they operated a binary options financial scheme illegally, which was in effect a fraud.
The five, all from Ontario, are David Cartu, Jonathan Cartu, Joshua Cartu, Leeav Peretz and Nati Peretz. The American is Ryan Masten.
According to the CFTC’s complaint, the Cartu brothers operated a binary options trading service that was a massive fraud and in concert with the Peretz brothers, they offered binary options trading of commodities to Canadian and American investors through an online platform, one of which was called “Beeoptions.”
The CFTC alleges that the two groups of brothers made material misrepresentations to secure money from innocent investors, promising them quick returns of up to 85%, and operated through a number of offshore companies incorporated in, among other places, Belize, Seychelles and Ireland.
The CFTC alleges that the binary options sold by the defendants were managed like a casino where the investor always plays against the “house”, so to speak. The orders from investors to place a bet on a binary option were not actual transactions on their platform; rather, the CFTC says that mere book entries were made on the back end to give the illusion of trades through an account. The payments from investors were payments to the binary options enterprise and no money ever changed hands after the investor paid the Cartu brothers’ branded platforms to place a bet.
A binary option is a securities. This type of option, like the casino example that the CFTC used, is a gamble on the future price of a commodity, a stock or Bitcoin, for example, at a precise date and time. The gamble on the future price is a yes / no proposition which yields returns to the person if the price increases and nothing to the person if the price decreases and in the latter case, the person is out their money entirely.
In the case of Beeoptions, and similar platforms like it operated by the defendants, regulators allege that the house always won even when it didn’t. Here, David Cartu allegedly said in an Israeli Court proceeding that he did not own Beeoptions but also allegedly said that it had a payments processing relationship with the now defunct WireCard.
The Times of Israel reported that Joshua Cartu operated an online gambling website in Cyprus (possibly betsafe.com). He is Ferrari-endorsed.
In order to obfuscate the financial transactions and minimize being de-risked by banks, the CFTC alleges that the Cartu brothers set up a FinTech payment processor in Ireland called Greymountain Management Limited. It did not have a licence to operate as a payments processor. It processed US$165 million in transactions for the Cartus and other third-party providers. Among other terms, the Canadian brothers referred to their payment processor as “SnowPay.”
SnowPay’s users were primarily from the US and Canada (60%); 20% were from Africa; and 10% from the EU.
SnowPay made large payments to the brothers in offshore companies, according to the CFTC. Two Cartu brothers received US$9.2 million each in payments from SnowPay and the third received US$4.8 million.
The CFTC is seeking an order for disgorgement, restitution and monetary fines as against the 5 Canadians, and one American. The restitution amount sought may be at least US$165 million, equal to the amount of payments processed by SnowPay. It could be more because that is just the amount processed through their FinTech payments processor, Greymountain.
In terms of assets, Joshua Cartu was fairly transparent about his wealth acquisition. He has a private jet and several luxury vehicles, and likely an account at HitBTC. He lives in a luxury condo in Budapest.
He may have ties to the online gambling website betsafe.com – it crosses over at the same events that Joshua Cartu was at for periods of time.
Betsafe is operational in Canada and accepts bets from Canadians, even though that is contrary to the Criminal Code and provincial gambling statutes. It processes payments, and has funds on deposit at Canada’s Interac and with Visa, MasterCard and PaySafe. No Canadian provincial gambling regulator has made a move to shut down betsafe from Canada so there are assets there if it is or was tied to the defendants during the relevant time described in the CRTC complaint.
David Cartu is believed to be in Ontario. Jonathan Cartu is believed to be in Israel. Joshua Cartu is believed to be in Budapest. The Peretz brothers are believed to be in Israel. Masten is believed to be in Texas.
In May of this year, the Ontario Securities Commission commenced proceedings against the Cartu brothers (here).