Cedar Finance and the CFTC: A Case of Fraudulent Binary Options

Cedar Finance, an online binary options trading platform, became infamous for its fraudulent practices that ultimately led to significant repercussions from the Commodity Futures Trading Commission (CFTC) in the United States. The CFTC’s actions against Cedar Finance and its associated individuals underscore the dangers of unregulated online trading platforms and the importance of investor protection.

In August 2016, the CFTC filed a complaint against Cedar Finance, along with its parent company B.O. TradeFinancials, Inc., and its owners, Ram Yahalom and Lior Babazadeh. The complaint alleged that from approximately 2013 to 2015, Cedar Finance fraudulently solicited and accepted over $9 million from U.S. residents to trade binary options. A crucial aspect of the fraud involved misleading customers about the profitability of trading on the platform and the true nature of binary options themselves.

The CFTC’s investigation revealed that Cedar Finance employed several deceptive tactics. These included:

• Misrepresenting Profitability: The company made false claims about the potential for high returns and downplayed the inherent risks associated with binary options trading. They enticed customers with promises of quick and easy profits, creating a misleading impression of the platform’s reliability and success rate.
• Manipulating Trading Results: The CFTC found evidence suggesting that Cedar Finance manipulated the trading platform to ensure that a majority of customers lost their investments. This was achieved by adjusting price feeds or delaying trade executions in ways that favored the company and disadvantaged traders.
• Failing to Register: Cedar Finance operated without registering with the CFTC as a designated contract market or a swap execution facility. This lack of registration meant that the company was not subject to regulatory oversight, allowing them to engage in fraudulent activities with impunity.

The CFTC’s legal action aimed to hold Cedar Finance and its principals accountable for their fraudulent conduct and to prevent further harm to U.S. investors. The case sought disgorgement of ill-gotten gains, civil monetary penalties, and permanent trading bans against the defendants.

Ultimately, the CFTC obtained default orders against Cedar Finance, B.O. TradeFinancials, Inc., Yahalom, and Babazadeh. These orders required the defendants to pay significant penalties and prohibited them from engaging in further violations of the Commodity Exchange Act. While the CFTC’s legal victory brought some measure of justice, recovering funds for defrauded investors proved challenging, highlighting the difficulties in pursuing international fraud schemes.

The Cedar Finance case serves as a cautionary tale about the risks associated with online binary options trading and the importance of regulatory oversight. It demonstrates the CFTC’s commitment to protecting investors from fraudulent schemes and holding accountable those who engage in deceptive practices. It also underscores the need for investors to exercise extreme caution when dealing with unregulated online trading platforms and to thoroughly research any investment opportunity before committing funds.