SEC Returns Investor Funds From Unregistered Broker

The U.S. Securities and Exchange Commission (SEC) announced that a Cyprus-based company has agreed to pay $11 million to settle charges that it illegally sold binary options to U.S. investors. A judge signed a court order Wednesday authorizing the distribution of this money to harmed investors through a Fair Fund.

Back in 2013, the SEC filed a complaint against Banc de Binary, along with its founder Oren Shabat Laurent and three affiliates, alleging that they failed to register the offering before soliciting U.S. customers through YouTube videos, spam e-mails and other Internet advertising. They failed to register as a broker-dealer before communicating directly with U.S. clients by phone, e-mail and instant messenger chats.

For some background on binary options: they differ from more conventional options contracts because the payout typically depends entirely on whether the price of a particular asset underlying the option will rise above or fall below a specified amount.
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According to the SEC report:

Banc de Binary, Laurent, and the affiliates agreed to jointly pay $7.1 million in disgorgement and $1.95 million in penalties to the SEC as well as $2 million in penalties to the Commodity Futures Trading Commission (CFTC), which filed a parallel action.  The court has established a Fair Fund that will be administered by the National Futures Association to compensate harmed investors.  Banc de Binary, Laurent, and the affiliates also agreed to be suspended from the securities industry for a year and permanently barred from issuing any penny stock offerings.  The settlement has been approved by the U.S. District Court for the District of Nevada.

Michele Layne, director of the SEC’s Los Angeles Regional Office, commented:

Banc de Binary and its affiliates completely disregarded U.S. laws and registration requirements, and as a result they must surrender millions of dollars and be suspended from the industry.